IPJBHl  yiM^JL  M 


Prof.  George  Bunnell 


PRACTICAL  REAL 
ESTATE  METHODS 

For  Broker,  Operator  &  Owner 


Thirty  Experts  on  How  to 
Buy,  Sell,  Lease,  Manage, 
Appraise,  Improve  and 
Finance  Real  Estate 


PUBLISHED  BY  DOUBLEDAY,  PAGE  &  CO. 

FOR  THB 

WEST  SIDE  YOUNG  MEN'S  CHRISTIAN  ASSOCIATION 

NEW  YORK 

I9IO 


(7  . 


COVYUOMT,  1909,   »Y 

WEST  SIDE  YOUNG  MEN'S  CHRISTIAN  ASSOCIATION 


THIRD  EDITION 


F»»  EDITION  or  1,600  VOLUMES 
SirTKUBis,   1909 

SBCOMD  EDITIOX  or  1,000  VOLUMES 
DXCKUBKK,  1909 


FOREWORD 

FRANCIS  E.  WARD 

THE  West  Side  Young  Men's  Christian  Association 
is  doing  an  important  service  to  realty  interests 
throughout  the  United  States,  by  collecting  in  a 
carefully  edited  volume  the  remarkable  series  of  real 
estate  lectures  and  discussions  delivered  in  its  special  real 
estate  classes  during  the  past  five  years.  To  have  al- 
lowed these  thoughtful  discussions  of  practical  real  estate 
problems,  carefully  prepared  by  acknowledged  experts 
of  the  Metropolitan  District,  to  perish  after  a  single  ut- 
terance would  have  limited  their  usefulness  to  the  few 
hundred  men  who  have  found  the  courses  of  great  value. 
It  would  mean  that  the  expression  of  the  concentrated 
knowledge  and  experience  of  twoscore  of  real  estate 
specialists,  probably  the  best  informed  real  estate  forum 
ever  assembled,  had  been  lost  to  the  thousands  of  real 
estate  men,  owners  and  investors,  who,  in  these  lectures, 
may  now  find  answers  to  many  daily  problems. 

Had  these  lectures  been  of  the  ordinary  run  of  public 
addresses,  dealing  in  glittering  generalities  and  avoiding 
concrete  problems,  this  statement  would  not  be  made. 
But  throughout  the  courses  their  trend  has  been  emi- 
nently practical,  dealing  with  existing  real  estate  per- 
plexities and  solving  problems  connected  with  buying, 
appraising,  selling,  mortgaging,  financing,  building  and 
managing  property,  and  the  solutions  have  been  based  on 

iii 

615668 


practical  Real  Estate  Methods 

the  actual  experiences,  the  successes  and  failures  of  men 
whose  word  in  their  special  lines  is  of  highest  value. 

Therefore,  this  book,  which  possibly  is  a  forerunner 
of  a  series  of  useful  and  timely  volumes  of  vocational 
literature  to  be  written  and  prepared  by  practical  masters 
of  leading  vocations,  is  recommended  to  all  who  have  to 
do  with  its  subject  matter  or  who  wish  to  gain  an  ex- 
haustive knowledge  of  realty  customs  and  practices.  To 
the  real  estate  man  and  his  employees  it  will  unques- 
tionably prove  a  most  valuable  book  of  reference,  as  the 
actual  lectures  proved  to  be  of  very  great  assistance  to 
many  active  dealers  in  the  New  York  real  estate  market. 

For  the  young  man  or  woman  wishing  to  enter  the 
realty  field,  this  volume  is  probably  the  best  textbook 
relating  thereto  and  the  best  guide  to  its  practice  ever 
collated.  While  making  no  extreme  claim,  its  editors 
have  no  delusions  that  its  perusal  will  make  the  reader 
a  full-fledged  real  estate  expert.  Such  is  not  its  purpose. 
A  book  cannot  replace  actual  practical  experience,  but 
as  a  short  cut  to  the  acquirement  of  much  useful  knowl- 
edge and  as  a  repository  of  the  experience  and  honest 
opinion  of  men  of  exceptional  success  in  the  particular 
lines  they  discuss,  this  book  should  prove  immediately 
helpful  to  those  with  limited  experience. 

The  owner  or  private  investor  and  the  prospective 
builder  for  investment  or  speculation  should  find  more 
than  one  of  its  chapters  worth  in  actual  cash  returns 
many  times  the  cost  of  the  entire  book.  Every  private 
investor  should  read  carefully  the  chapters  on  appraising, 
the  series  on  building  and  the  summary  on  closing  con- 
tracts— all  being  the  work  of  accepted  specialists  who 
have  given  freely  from  their  vast  store  of  knowledge. 

Moreover,  because  of  the  way  in  which  it  deals  with 

iv 


Foreword 

essential  principles  of  realty  trading,  the  value  of  this 
volume  is  by  no  means  confined  to  those  in  and  around 
New  York.  The  principles  defined,  the  problems  solved, 
are  applicable  to  real  estate  conditions  in  any  city,  and 
are  of  direct  usefulness  to  those  interested  in  the  develop- 
ment of  urban  or  suburban  property,  irrespective  of  its 
geographical  location.  Herein  are  treated  the  principles 
used  by  men  who  are  active  dealers,  buyers  and  sellers 
of  real  estate ;  men  who  would  have  become  great  finan- 
cial powers  and  land  operators  even  if  the  field  of  their 
endeavors  had  been  other  than  trafficking  in  New  York 
realty,  and  the  building  and  management  of  New  York 
skyscrapers  or  tenements.  Theirs  would  have  been  the 
anticipation  of  the  effect  of  transportation  in  and  about 
Manhattan  Island,  and  the  financing  of  great  suburban 
developments,  or  the  development  of  real  estate  interests 
in  any  community  of  the  United  States.  For  these  lec- 
turers have  revealed  to  us,  in  addition  to  their  long  and 
varied  practical  experience,  that  subtle  something  which 
may  be  defined  as  the  "real  estate  instinct."  The  success- 
ful possess  it.  May  the  readers  of  this  book  acquire  it ! 


. 


A  WORD  OF  THANKS 


THE  WEST  SIDE  YOUNG  MEN'S  CHRISTIAN 
ASSOCIATION  acknowledges  its  deep  in- 
debtedness to  each  of  the  authors  of  the  thirty 
chapters,  and  also  to  many  other  real  estate  ex- 
perts in  New  York,  who  have  assisted  materially 
as  advisers  to  the  editors.  We  feel  peculiarly 
under  obligation  to  these  men  for  the  direct  way 
in  which  they  have  responded  to  our  request  for 
articles  that  should  be  practically  helpful  to  men. 
In  offering  this  volume  to  the  public,  we  feel 
that  we  are  but  extending  the  directly  helpful 
results  of  our  educational  work  to  a  broader 
constituency. 


Vll 


CONTENTS 


VAGE 

FOREWORD iii 

FRANCIS  E.  WARD 
'  Former  President,  Real  Estate  Board  of  Brokers 

REAL  ESTATE  BROKERAGE  AND  AUCTIONEERING     .        i 

JOSEPH  P.  DAY 
President,  Real  Estate  Board  of  Brokers 

RELATIONSHIP  BETWEEN  BROKER  AND  CUSTOMER 

AND  LEGAL  PRINCIPLES  INVOLVED  ....       16 
ABRAHAM  STERN 

Jackson  &  Stern 

LEASING 42 

ALBERT  B.  ASHFORTH 

Albert  B.  Ashforth  &  Co. 

MANAGEMENT    OF    APARTMENT    AND    TENEMENT 

PROPERTY 50 

RANSOM  E.  WILCOX 

Wilcox  &  Shelton 

MANAGEMENT  OF  LOFT  PROPERTY 63 

EDWIN  H.  HESS 
M.  &  L.  Hess 

MANAGEMENT  OF  DOWN -TOWN  OFFICE  BUILDINGS  .      72 

JOEL  S.  DE  SELDING 
De  Selding  Bros.,  Agents  for  Singer  Building 

How  TO  APPRAISE  PROPERTY 8l 

EDWARD  H.  GILBERT 
/.  Edgar  Leaycraft  &  Co. 

ix 


Contents 

FACE 

POINTS  TO  BE  CONSIDERED  IN  VALUING  A  BUILD- 
ING  92 

G.  RICHARD  DAVIS 
Secretary,  A.  L.  Mordecai  &  Son 

THE  STANDARDIZATION  OF  REAL  ESTATE  VALUA- 
TIONS  119 

IRVING  RULAND 

Chairman,  Appraisal  Committee,  Real  Estate  Board  of  Brokers, 
yice-President,  Ruland  &  Whiting  Co. 

How  PROPERTY  is  CONDEMNED    .     .     .     .     .     .     122 

JOHN  H.  HALLOCK 
George  G.  Hallock  Jr.'s  Sons 

EXPERT  TESTIMONY     .     .     .    • .     .     .     .     .     .     152 

JOHN  MEANS  THOMPSON 
/.  M.  Thompson  &  Co.,  Expert  Appraisers 

How  PROPERTY  is  ASSESSED 167 

HON.  LAWSON  PURDY 
President,  Board  of  Taxes  and  Assessments 

MORTGAGE  LOANS  ON  REAL  ESTATE        ....     182 
G.  RICHARD  DAVIS 

MARGINS  ON  MORTGAGE  LOANS 193 

GEORGE  A.  KURD 
Vice-President,  Mortgage  Bond  Company  of  New  York 

BUILDING  LOANS 212 

G.  RICHARD  DAVIS 

STABILITY  OF  REAL  ESTATE  DURING  PANICS    .     .     230 
WALTER  STABLER 

Comptroller,  Metropolitan  Life  Ins.  Co. 

OPERATING 235 

ROBERT  E.  SIMON 

yice-President  and  General  Manager,  Henry  Morgenthau  Co. 

WHAT  TITLE  INSURANCE  Is 247 

PHILIP  S.  DEAN 
Attorney,  Lawyers'  Title  Insurance  and  Trust  Co. 


Contents 

PAGE 

FIRE  INSURANCE     ,     .     ^ 252 

R.  O.  HAUBOLD 

A.  Haubold  &  Son 

How  TO  REDUCE  INSURANCE  COSTS   .     .     .     .     .     256 

W.  R.  CRANE 
North  River  Insurance  Co. 

REAL  ESTATE  INVESTING 262 

HENRY  MORGENTHAU 
President,  Henry  Morgenthau  Co. 

REAL  ESTATE  CORPORATIONS 270 

ROBERT  E.  DOWLING 
President,  City  Investing  Co. 

CONTRACTS  FOR  THE  SALE  OF  REAL  ESTATE  .     .     .     276 

HENRY  F.  MILLER 
Member  of  the  New  York  Bar 

NOTES  AND  COMMENTS  ON  THE  LAW  OF  LANDLORD 

AND  TENANT 285 

HENRY  F.  MILLER 

ESTATES  AND  INTERESTS  ARISING  FROM  MARRIAGE  .     292 

CHARLES  L.  BURR 
Member  of  the  New  York  Bar 

TENEMENT  HOUSE  LAW 313 

LAWRENCE  VEILLER 
WATER-FRONT  PROPERTY 331 

HON.  MCDOUGALL  HAWKES 

Former  Commissioner,  Department  of  Docks  and  Ferries, 

Member  of  Commission  on  Harbors  and  Shipping  of  the 

Chamber  of  Commerce,  Etc. 

REAL  ESTATE  MOVEMENTS  IN  THE  BRONX  .     .     .       347 

J.  CLARENCE  DAVIES 
/.  Clarence  Davies  &  Co. 

ACREAGE — How  TO  DEVELOP  IT 355 

DEAN  ALVORD 

Dean  Alvord  Co. 

xi 


Contents 

»AGK 

MANAGING  A  REAL  ESTATE  OFFICE 363 

RONALD  C.  LEE 
General  Manager,  The  Realty  Records  Co. 

OLD  NEW  YORK  AS  KNOWN  BY  A  REAL  ESTATE 

PIONEER 373 

E.  A.  CRUIKSHANK 

DAVIES  AND  HOFFMAN  RULES 377 

WILLIAM  E.  DAVIES 
Expert  Appraiser  for  City  of  New  York,  Etc. 

BROKERS'  AND  AUCTIONEERS'  COMMISSIONS  .     .     .     385 
INDEX 389 


Xll 


REAL  ESTATE  BROKERAGE  AND 
AUCTIONEERING 

JOSEPH  P.  DAY 

Essentials  of  Brokerage  Success — Value  of  Complete 
Information  —  Personality  —  Perseverance,  Decision 
and  Direction — Detecting  Unusual  Values — Closing  a 
Contract — Showing  Properties — The  Auctioneer — 
Advertising  Public  Sales — Concentrated  Copy — Ac- 
tion and  Reaction — Auction  Valuations 

THE  real  estate  broker,  as  the  connecting  link  be- 
tween owner  and  purchaser,  must  rely  for  success 
primarily  upon  the  establishment  of  some  good 
system  which  keeps  him  constantly  in  touch  with  active 
properties  and  those  which  can  be  brought  into  the 
market,  and  also  with  lists  of  persons  with  money  to 
invest  in  various  forms  of  real  estate.  Having  a  piece 
of  property  to  sell  and  a  prospective  purchaser  in  mind, 
he  must  depend,  to  close  a  sale,  upon  the  following 
elements:  his  personality;  presentation  and  avoidance 
of  misstatement ;  perseverance  in  the  right  direction ; 
securing  a  balance  between  what  the  owner  will  take 
and  the  buyer  will  give;  and  ability  to  draw  up  and 
secure  the  signing  of  a  contract  the  instant  the  two 
minds  are  in  agreement.  These  qualities  are  all  essen- 
tials of  real  estate  salesmanship. 

In  locating  the  prospective  purchaser,  the  matter  of 
decision  plays  a  most  important  part,  especially  in  saving 
the  broker's  time  and  money.  For  instance,  it  is  not  exer- 


Practical  Real  Estate  Methods 

cising  proper  decision  to  offer  a  big  acreage  tract  to 
a  man  who  is  able  to  operate  only  in  a  small  lot  de- 
velopment or  to  offer  a  Broadway  business  property 
to  a  man  whose  field  is  restricted  to  operating  in  tene- 
ment houses.  The  reverse  also  is  true;  it  is  poor  policy 
to  offer  a  tenement  house  to  a  man  who  confines  himself 
to  big  business  properties.  And  while  perseverance  is 
generally  a  virtue,  perseverance  in  trying  to  sell  a  piece 
of  property  to  a  man  who  never  deals  in  that  particular 
variety  of  investment  is  so  much  wasted  effort.  But 
perseverance  properly  directed  toward  influencing  a  pro- 
spective purchaser  who  has  been  chosen  with  proper 
decision  is  absolutely  essential  to  success.  The  most 
successful  broker  is  the  one  who  can  persevere  the 
most  in  the  direction  of  a  purchaser  to  whom  the  pro- 
posed property  offers  a  natural  investment. 

Value  of  Complete  Information 

In  order  that  proper  decision  and  decisive  perseverance 
may  be  introduced,  it  follows  that  the  broker  must  keep 
all  the  data  he  can  get  about  the  tendencies,  likes  and 
dislikes  of  each  of  his  list  of  possible  investors.  By 
means  of  cross  indexing  or  other  devices,  he  must  be 
able  to  pick  out  those  that  offer  the  best  market  for 
each  kind  of  property.  If  he  is  in  the  habit  of  mailing 
offers  and  notices  frequently  to  his  list  of  "prospects," 
he  will  save  greatly  on  printing  and  postage  if  he  can 
cut  from  the  mailing  list  for  a  specific  circular  all  those 
who,  it  is  certain,  will  have  no  interest  whatever  in  the 
special  offering.  Moreover,  if  this  plan  can  be  followed, 
the  broker  will  avoid  making  his  mail  matter  a  nuisance 
to  many  people  and  escape  the  danger  of  having  it  all 


Real  Estate  Brokerage  and  Auctioneering 

thrown  into  the  waste  basket  because  the  recipient  has 
gained  the  impression  that  none  of  it  has  any  direct 
interest  for  him.  Inasmuch  as  newspaper  advertising 
is  but  a  means  of  seeking  a  buyer,  decision  as  to  the 
class  to  be  interested  will  determine  the  mediums  to 
be  employed,  the  amount  of  space  used  and  the  class 
of  copy  put  out. 

When  the  prospective  buyer  is  definitely  located,  the 
broker  must  bring  into  play  his  salesmanship  ability. 


Personality 

In  salesmanship  the  personality  of  the  broker  enters 
almost  immediately  and  continues  to  be  a  factor  through- 
out. Whether  the  broker  will  secure  the  right  to  list 
a  property  often  depends  upon  his  personality — the  way 
he  impresses  the  owner  at  the  first  meeting.  Sometimes 
unfavorable  impressions  created  the  first  five  minutes 
can  never  be  overcome.  Not  infrequently  the  question 
of  whether  a  purchaser  will  even  look  at  the  property 
depends  on  the  broker's  appearance  and  manner.  For 
until  we  actually  know  the  real  man  we  are  forced  to 
judge  by  his  exterior  characteristics.  Sometimes  a  man 
can  live  down  first  impressions,  but  any  unfavorable 
impression  is  a  handicap  and  therefore  puts  a  useless 
obstacle  in  the  way.  In  general,  the  personality  of  the 
broker  should  create  the  impression  that  he  is  a  solid, 
intelligent  man  with  plenty  of  energy  and  perseverance. 
Naturally  he  should  be  neat  in  dress,  have  no  eccen- 
tricity of  raiment  that  will  attract  the  mind  of  the  cus- 
tomer away  from  the  deal  or^  create  the  impression  that 
he  is  sporty  or  frivolous.  I  have  known  of  cases  where 
the  fact  that  a  caller's  clothing  was  over-scented  with 

7 


Practical  Real  Estate  Methods 

tobacco  created  an  unfavorable  impression.  Moreover, 
the  broker  must  be  able  to  make  friends,  be  a  man  who 
has  ideas  and  whom,  therefore,  men  are  glad  to  see 
even  if  they  have  no  business  at  the  particular  moment. 
But  this  implies  no  necessity  whatever  on  the  broker 
of  drinking  or  smoking  if  he  does  not  want  to  do  so. 
I  have  never  been  able  to  discover  that  drinking  is 
essential  to  commercial  success. 

To  sell  a  piece  of  property,  the  broker  naturally  must 
know  that  property  thoroughly.  It  is  good  practice, 
then,  for  the  broker  to  visit  the  property  himself  or 
to  have  a  competent  assistant  inspect  it.  The  results 
of  such  an  inspection  should  be  made  a  matter  of  record 
and  a  complete  description  of  it  and  all  data  bearing 
on  its  actual  value  and  the  value  of  property  in  the 
neighborhood  made  readily  accessible  to  those  in  his 
office.  Where  records  are  to  be  used  by  more  than  one 
person,  it  is  essential  to  have  a  fixed  system  of  denoting 
quality.  "Good,"  "Fair,"  "Excellent,"  "Poor,"  etc.,  as 
applied  to  buildings  should  have  a  definite  value,  mean 
a  specific  standard  throughout  the  office. 

Detecting  Unusual  Features 

In  determining  the  value  of  a  piece  of  property  and 
in  working  up  its  selling  and  talking  points,  the  broker 
naturally  must  be  thoroughly  familiar  with  the  neigh- 
borhood. He  must  be  aware  of  projected  improvements 
in  transportation,  change  in  character  of  tenancy,  keep 
track  of  parallel  sales,  gather  newspaper  and  private 
information  and  also  be  able  to  work  out  new  uses  for 
the  property  which  would  increase  its  earning  power. 
For  example,  especially  in  a  new  section,  he  should  be 


Real  Estate  Brokerage  and  Auctioneering 

able  to  foresee  that  the  particular  plot  would  make  a 
fine  location  for  a  certain  sort  of  store.  Naturally,  he 
must  be  able  to  detect  strategic  values  or  key  situations. 
In  a  recent  deal,  a  broker  was  able  to  foresee  that  an 
adjoining  owner  would  eventually  be  forced  to  buy  a 
certain  lot  and  so  advised  his  client  to  pay  what  seemed 
to  be  an  abnormal  price  in  view  of  the  sales  record 
for  the  neighborhood.  In  this  instance,  a  year  of  waiting 
brought  a  profit  of  $20,000.  In  this  particular  instance, 
the  rents  of  the  parcel  in  question  when  capitalized  did 
not  indicate  anything  like  the  price  first  paid.  The  fact 
of  the  matter  was  that  the  rents  were  too  low,  and  the 
first  step  of  the  broker  was  to  raise  them  materially. 
In  arriving  at  value  by  capitalizing  rents,  therefore,  it 
is  necessary  to  make  certain  that  the  current  rents  are 
not  too  low,  or  to  have  enough  vision  to  foresee  a  greatly 
increased  income  from  a  new  building  or  from  improving 
the  old  building.  Vision  of  this  sort  frequently  sup- 
plies admirable  talking  points  to  present  to  the  purchaser. 
Knowledge  of  the  conditions  which  detract  from  the 
value  of  a  piece  of  property  also  is  necessary,  both  to 
enable  the  broker  to  prepare  himself  to  meet  such  ob- 
jections on  the  part  of  the  purchaser  and  for  use  in 
educating  an  owner  who  is  asking  too  much  for  his 
property.  For  example,  a  public  school  on  a  block  hurts 
private  dwellings,  but  helps  tenement  property.  An 
armory  hurts  a  neighborhood  because  it  is  unoccupied 
except  for  a  few  hours  at  night.  Consequently,  it  does 
not  help  the  butcher  or  baker  and  is  of  service,  if  at 
all,  only  for  a  few  hours  each  evening  to  the  corner 
saloon.  In  other  words,  an  armory  cuts  out  a  block 
of  families.  The  restrictions  on  property  or  adjoining 
property  also  are  very  important.  A  man  does  not 


Practical  Real  Estate  Methods 

want  to  buy  a  high-class  private  dwelling  for  his  own 
use  if  some  one  can  build  cheap  flats  on  the  property 
across  the  street. 

Need  for  Quick  Closing 

Skilful  use  of  facts  and  arguments  which  will  lead 
the  purchaser  to  increase  his  offer  and  the  owner  to 
lower  his  original  asking  price,  if  it  be  really  excessive, 
is  very  essential.  For  the  broker,  after  getting  the  pur- 
chaser interested  in  a  piece  of  property,  must  be  like 
a  pair  of  balance  scales.  Invariably  he  will  find  the 
owner  quite  up  in  his  price  as  compared  with  the  pur- 
chaser, who  is  low  in  his  offer.  The  broker  must  be 
able  to  get  the  one  down  and  the  other  up  at  practically 
the  same  time.  He  must  be  able  to  detect  the  psycho- 
logical moment  when  the  two  minds  meet  and  when 
he  has  them  evenly  balanced  draw  the  contract  right 
then  and  there.  Let  him  not  delay  an  instant.  He 
should  draw  the  memorandum  of  contract  in  lead  pencil 
on  the  back  of  an  envelope  if  he  hasn't  anything  else 
to  draw  it  on.  For  if  he  gives  the  two  parties  time  to 
consider  after  they  have  once  struck  a  balance,  he  may 
never  get  them  to  agree  a  second  time.  Brokers  who 
are  clever  at  closing  contracts  at  a  moment's  notice 
possess  a  most  valuable  asset. 

In  showing  property  to  prospective  purchasers,  the 
broker  should  not  talk  too  much.  Leave  something  to 
the  purchaser's  imagination ;  do  not  insult  him  by  making 
him  feel  that  you  think  he  doesn't  know  anything.  Give 
him  a  chance  to  let  his  own  mind  play  on  the  property 
and  give  him  a  chance  to  establish  his  own  convictions 
as  to  the  property's  desirability.  And  above  all,  the 
broker  should  never  misrepresent  facts,  as  misrepresenta- 

6 


Real  Estate  Brokerage  and  Auctioneering 

tion  of  fact  may  invalidate  a  contract,  and  besides  it 
is  best  to  be  straight  and  clean  cut  in  all  your  dealings. 


Showing  Properties 

Decision  and  direction  of  perseverance  are  as  im- 
portant in  showing  a  list  of  properties  as  they  are  in 
locating  a  purchaser.  Therefore,  it  is  advisable  not  to 
show  a  purchaser  too  many  different  properties  all  at 
once.  This  is  particularly  true  in  dealing  with  dwelling 
houses.  After  a  man  has  visited  ten  or  fifteen  houses 
in  one  morning,  he  gets  confused  and  probably  has  a 
very  vague  idea  about  any  except  the  two  or  possibly 
three  that  were  last  on  the  trip  of  inspection.  It  is 
good  practice,  therefore,  to  pick  out  two  or  three  houses 

— not  more  than  a  half-dozen which  seem  to  offer 

just  about  what  will  suit  the  customer.  If  he  is  a  man 
whose  general  style  indicates  clearly  that  he  wants  a 
modern  house  with  two  or  three  baths,  select  a  few 
houses  of  that  type  and  show  them  to  him.  In  each 
house  it  is  well  to  try  to  identify  that  house  for  the 
customer  and  fix  it  definitely  in  his  mind  by  dwelling 
on  some  desirable  and  distinguishing  feature.  The  sort 
of  people  that  own  adjoining  houses,  an  open  fireplace, 
a  cedar  closet  or  some  other  seemingly  minor  accessory 
of  a  house  which  happened  to  strike  the  fancy  of  the 
purchaser  has  frequently  clinched  a  sale. 

Seeming  objections  to  a  piece  of  property,  the  broker 
should  be  ready  to  answer,  but  it  is  very  bad  policy 
to  approach  a  house  with  the  fear  that  such  and  such 
an  objection  will  be  an  insurmountable  obstacle.  Let 
the  customer  raise  the  point.  In  one  such  case,  the 
broker,  after  submitting  various  houses  to  a  man  and 


Practical  Real  Estate  Methods 

his  wife,  who  were  in  a  quandary  as  to  final  choice, 
showed  a  dwelling  near  a  railroad.  Suddenly  the  little 
son  of  the  couple,  who  was  at  a  window,  called  out: 
"Oh,  see  the  'choo  cars/  "  The  broker  saw  his,  com- 
mission vanish  as  the  train  came  snorting  up  and  the 
window  was  raised  so  that  the  child  could  get  a  better 
view.  And  yet  the  "choo  cars"  were  the  thing  that 
clinched  the  sale,  because  the  parents  knew  the  child's 
passion  for  looking  at  trains,  and  their  willingness  to 
gratify  it  entirely  outweighed  any  annoyance  they  might 
feel  at  the  noise.  The  skilful  broker,  therefore,  tries 
to  size  up  accurately  the  customer's  point  of  view.  In 
many  cases,  he  must  overcome  objections  that  are  purely 
imaginative.  But  he  can  make  a  much  better  argument 
against  an  objection  if  he  himself  has  not  allowed  him- 
self to  feel  thar  this  one  flaw  will  break  off  the  deal. 
It  is  just  as  well  to  possess  optimism  in  such  cases. 
But  throughout  the  great  thing  is  tact.  Optimism  must 
not  be  allowed  to  give  an  idea  that  the  broker  is  over- 
anxious to  make  a  sale. 

Wives  frequently  play  a  most  important  part  in  a 
real  estate  transaction,  and  it  is  well  not  to  overlook 
them.  Many  times,  after  a  seller  and  a  buyer  are  prac- 
tically agreed  on  a  price,  the  purchaser  will  say,  "I 
want  to  talk  it  over  with  my  wife."  Sometimes  this 
is  entirely  sincere;  in  other  cases  it  is  simply  a  subter- 
fuge of  the  purchaser  to  gain  time  to  think  things  over 
by  himself,  as  he  fears  the  eloquence  of  the  broker  is 
over-balancing  his  judgment.  But  when  the  wife  is 
mentioned,  the  wise  broker  offers  to  go  at  once  with  the 
purchaser  to  see  her,  or  makes  an  appointment  for  the 
evening.  He  then  endeavors  to  lead  the  wife  to  regard 
the  property  in  the  same  light  as  her  husband. 

8 


Real  Estate  Brokerage  and  Auctioneering 

Concentration  in  Selling 

In  pushing  property,  it  is  good  practice  to  concen- 
trate rather  than  to  spread  one's  effort  out  until  it  is 
thin.  Little  is  gained  by  actually  pushing  a  single  prop- 
erty at  the  same  time  with  each  of  a  large  list  of  possible 
buyers.  Nor  is  it  good  practice  to  try  to  play  one 
against  the  other.  This  does  not  mean,  of  course,  that 
the  property  should  not  be  brought  to  the  attention  of 
all  who  might  be  interested.  But  to  attempt  a  vigorous 
personal  selling  effort  with  many  different  principals  at 
once  involves  unwarranted  effort  and,  moreover,  if  the 
fact  becomes  known,  has  a  tendency  to  cheapen  the 
property,  because  people  get  the  idea  that  there  is  an 
awful  rush  to  sell  it.  The  effect  is  much  the  same  as 
when  a  mortgage  is  offered  around  promiscuously.  The 
policy  of  playing  one  purchaser  against  another  in  pri- 
vate selling,  if  discovered,  will  be  very  likely  to  lessen 
confidence  and  possibly  alienate  valuable  clients.  For 
the  same  reason,  a  broker  should  not  operate  for  him- 
self. For  if  it  be  known  that  a  broker  is  on  the  lookout 
to  snap  up  the  good  things  for  himself,  purchasers  will 
get  the  idea  that  he  offers  them  only  what  he  himself 
doesn't  want. 

Protecting  the  Purchaser 

When  representing  the  purchaser,  the  broker  should 
never  by  any  chance  make  a  written  offer  for  the  prop- 
erty. If,  for  example,  a  purchaser's  broker  should  write 
to  the  owner's  broker  that  his  client  is  willing  to  give 
$350,000  for  a  certain  property,  the  owner's  man  may 
show  that  letter  to  other  prospective  purchasers.  Such 
a  letter  is  definite  proof  that  some  one  else  wants  the 

9 


Practical  Real  Estate  Methods 

property  and  fixes  a  minimum  valuation.  "If  Smith, 
the  well-known  broker — he's  a  shrewd  appraiser — offers 
in  writing  to  give  $350,000  for  a  client,  you  can  see 
how  valuable  the  parcel  is,"  may  be  the  use  that  will 
be  made  of  the  offer.  This  simply  places  the  purchaser 
in  a  position  where  his  offer  can  be  made  a  boomerang. 
If,  on  the  other  hand,  the  offer  is  made  orally,  the 
owner's  broker  has  nothing  to  show,  and  his  statement 
of  the  offer,  in  the  absence  of  proof,  might  be  looked 
upon  as  insincere. 


AUCTIONEERING 

On  the  auction  stand,  all  the  qualifications  of  the 
expert  broker  are  essential.  In  addition,  the  successful 
auctioneer  must  be  able  to  answer  questions  instantly 
and  effectively,  and  must  have  a  certain  amount  of 
advertising  ability  in  order  to  put  the  property  effec- 
tively before  the  buying  public. 

Auction  sales  are  really  of  two  kinds:  first,  Supreme 
Court  sales — foreclosure,  partition  and  trustees'  sales  by 
order  of  the  court;  and,  second,  voluntary  sales — execu- 
tors', dissolution  and  ordinary  voluntary  sales.  These 
sales  are  obtained  by  the  auctioneer  because  of  his 
personality,  his  perseverance,  his  reliability  and,  finally, 
his  reputation  as  a  result  getter. 

Advertising 

Once  the  sale  is  secured,  the  first  step  is  to  advertise 
the  sale.  Decision  must  be  made  as  to  the  best  time 
to  hold  the  sale  and  the  classes  of  buyers  to  whom 

10 


Real  Estate  Brokerage  and  Auctioneering 

advertising  should  be  directed.  This  gives  an  idea  as 
to  what  sort  of  copy  and  space  to  use  and  what  mediums 
to  employ.  In  preparing  advertisements,  originality  is 
very  important.  But  it  is  not  necessary,  in  order  to 
be  original,  to  be  undignified.  Where  catch  phrases  are 
employed  they  should  invariably  carry  with  them  an 
important  idea  of  why  to  buy.  They  should  lead  to 
a  brain  impression,  instead  of  being  merely  eye- 
catchers.  By  making  a  brain  impression  is  meant  getting 
the  idea  past  the  eye  as  mere  type  or  picture  and  fixing 
it  in  the  brain  as  an  impression  that  will  last  and  help 
establish  the  notion  "good  to  buy  for  ME."  Pictures 
employed  in  advertising  are  another  good  medium  for 
brain-impressing  power. 

Economy  is  the  great  thing  in  advertising.  Simply  be- 
cause an  advertisement  brings  a  goodly  number  of 
inquiries  and  sells  a  good  deal  of  property,  it  is  not 
necessarily  an  economical  ad.  Smaller  space  with  dif- 
ferent copy  might  have  produced  equal  results.  Differ- 
ent copy  in  the  same  space  might  have  gained  greater 
returns.  Double  the  amount  of  space  might  have  pro- 
duced three  times  the  results.  An  advertisement  is  eco- 
nomical only  when  it  produces  maximum  results.  In 
some  cases,  bill  boards,  street  car  cards,  electric  signs, 
extensive  mail  matter,  are  necessary  and  economical; 
in  other  cases  such  a  campaign  would  be  too  costly. 
The  one  test  of  advertising  is  sales,  or  perhaps  the 
number  of  people  it  induces  to  visit  the  property.  For 
it  profits  an  auctioneer  little  if  thousands  ask  for  in- 
formation and  none  of  them  buys,  or  the  sales  do  not 
pay  for  the  publicity  campaign  and  yield  a  good  profit 
besides.  But  if  sales  are  unsatisfactory,  the  advertiser 
must  not  always  blame  the  mediums  he  has  used.  It 

II 


Practical  Real  Estate  Methods 

may  be  that  he  did  not  use  the  right  copy,  or  that  his 
follow-up  matter  for  inquirers  was  wrong.  Getting 
people  to  look  at  the  property  is  half  the  battle.  And 
after  an  advertisement  has  "pulled"  a  large  number 
of  visitors,  if  no  sales  follow,  the  fault  lies  either  in 
the  fact  that  the  copy  made  unfounded  statements,  that 
the  property  is  not  good,  or  that  the  auctioneer  is  a 
poor  salesman.  An  advertisement  which  exaggerates 
is  dangerous.  The  man  who  reads  of  a  flowery  paradise 
and  finds  a  desert  waste  will  never  buy.  Yet  this  same 
man,  if  he  had  not  been  led  to  expect  too  much,  might 
have  been  glad  to  invest  in  desert  property. 


Concentrated  Copy 

Concentration  in  advertising  is  one  of  the  most  effec- 
tive devices  for  economy  of  expenditure  and  maximum 
advertising  effect,  for  a  single  sales  day.  If  an  owner 
gives  an  auctioneer  $100  to  advertise  a  single  piece  of 
property,  little  effect  can  be  secured  any  way  it  is  spent. 
But  if  the  auctioneer  has  nine  other  parcels,  each  putting 
in  $100,  this  gives  $1,000  to  spend  in  making  that  sale, 
and  each  parcel  to  be  offered  attracts  attention.  Each 
parcel  can  be  made  a  prominent  feature  of  ten  $100 
advertisements.  Care  must  be  taken,  of  course,  to  see 
that  each  parcel  retains  its  own  identity.  One  can  readily 
see  how  the  great  special  sale  advertisements  of  a  de- 
partment store  would  be  weakened  in  effect  if  they 
were  broken  up  into  a  score  of  little  advertisements, 
one  advertising  furniture,  another  shoes,  a  third  dress 
goods,  etc.,  all  in  different  parts  of  the  paper.  There 
would  be  loss  in  the  mere  repetition  of  the  address  of 
the  store  and  of  the  terms  of  sale. 

12 


Real  Estate  Brokerage  and  Auctioneering 

Each  of  our  ten  fingers  has  its  own  work  to  perform. 
Yet,  if  we  combine  the  power  of  the  ten  in  grasping 
what  we  wish  to  move,  we  can  accomplish  results  which 
no  one  of  our  fingers  can  achieve  even  proportionately. 
This  illustrates  the  natural  law  of  concentration  of 
power  in  physical  matters.  The  same  law  applies  to 
the  workings  of  the  human  mind.  Concentration  in 
advertising  simply  means  having  ten  type  fingers  "pull- 
ing" on  the  buyers  all  at  once,  instead  of  one  finger* 
trying  to  pull  by  itself. 

Introducing  an  Auction  Sale 

The  actual  auctioning  of  property  is  introduced  by 
reading  the  terms  of  sale  and  making  them  entirely  clear 
to  everyone.  The  different  selling  points  of  the  property 
are  driven  home  to  the  minds  of  the  buyers.  In  this 
work,  the  auctioneer  who  has  vision  —  the  ability  to 
foresee  the  possibilities  of  a  vacant  tract,  to  work  out 
as  it  were  a  concrete  development  for  it,  to  show  what 
sort  of  store  or  building  will  make  money  on  a  certain 
corner,  what  residence  property  will  pay  when  built — 
has  an  advantage.  Naturally,  the  auctioneer  must  have 
at  his  tongue's  end  the  history  of  parallel  plots  where 
investors  have  made  handsome  profits,  and  be  able  to 
argue  from  the  trend  of  values  in  adjoining  neighbor- 
hoods the  value  of  the  present  offering.  In  this  expo- 
sition of  the  property  he  must  not  be  too  glib  or  flowery. 
Let  him  make  his  points  in  plain  every-day  English,  using 
as  far  as  possible  simple  snappy  cases  to  illustrate  his 
meaning  and  to  create  sincere  brain  impressions.  Spoken 
words,  like  type,  to  be  effective,  must  sink  into  the 
brain. 

13 


Practical  Real  Estate  Methods 

Action  and  Reaction 

When  bids  are  called  for,  the  man  on  the  block  must 
use  another  great  natural  law  —  action  and  reaction. 
This  may  be  illustrated  with  a  piece  of  rubber  band. 
If  we  stretch  a  rubber  band  and  continue  to  stretch 
it  beyond  the  breaking  point,  it  snaps  and  we  have  a 
smaller  piece  of  rubber.  If  we  repeat  the  process  with 
the  smaller  piece,  that  too  will  snap  and  leave  a  still 
smaller  bit,  and,  mind  you,  with  less  vitality.  If,  on 
the  contrary,  in  stretching  our  rubber  band,  we  "sense" 
when  it  is  approaching  the  breaking  point  and  let  it 
down,  we  can  continue  to  work  with  that  band  without 
having  it  snap. 

The  same  condition  is  present  in  the  human  mind. 
If  we  talk  and  talk  and  shout  and  shout  at  the  people 
beyond  measure,  we  soon  have  them  up  to  such  a  pitch 
that,  like  the  rubber  band,  their  tension  will  snap.  When 
this  happens,  some  of  them,  including  bidders  who  are 
really  interested,  may  leave  without  buying.  Instead 
of  talking  at  them  in  a  continuous  strain,  we  should 
ease  them  up  at  times,  using  the  law  of  "action  and 
reaction."  Suppose  we  are  selling  the  property  No.  1563 
Broadway.  The  bids  have  started  at  $15,000  and  have 
been  raised  in  jumps  of  from  $1,000  to  $5,000  to  $60,000. 
Action  is  very  keen  and  the  audience  begins  to  get 
pretty  well  strained.  The  auctioneer,  to  ease  up  things 
(reaction)  calls  attention  to  some  amusing  incident  in 
the  audience.  The  audience,  because  of  the  strain,  is 
ready  and  glad  to  relax  and  enjoys  the  little  respite. 
This  rests  them,  and  the  auctioneer  proceeds  with  the 
bidding.  If  the  auctioneer  himself  has  the  proper  bal- 
ance and  avoids  over-straining  the  audience,  he  will 

14 


Real  Estate  Brokerage  and  Auctioneering 

finally  bring  the  bids  up  to  the  value  of  the  property 
and  so  get  the  proper  result.  In  this,  as  in  a  private 
sale,  the  auctioneer  is  really  bringing  about  a  balance 
between  the  owner  and  the  buying  public. 

The  letting  down  of  the  tension,  however,  must  be 
very  skilfully  handled,  for  it  is  possible  to  make  your 
interruption  of  such  a  sort  that  it  breaks  up  seriousness 
and  takes  attention  entirely  away  from  the  property. 
The  interruption  should  be  of  such  a  nature  that  it  will 
lower  the  tension  from  bidding,  but  not  divert  thought 
from  the  scene  of  action.  Interruptions  before  the  ten- 
sion point  is  reached  are  dangerous.  For  this  reason, 
the  auctioneer  must  be  able  to  answer  questions  from 
the  audience  instantly  and  in  few  words,  and  in  such 
a  way  that  they  do  not  disturb  the  growing  attention. 
One  reason  why  the  little  interruption  frequently  leads 
to  better  bids  is  that  it  gives  bidders  a  moment  or  two 
to  think  the  value  over  for  themselves  and  to  feel  that 
their  judgment  is  not  being  overbalanced  by  the  excite- 
ment of  bidding.  And  the  public  must  remember  that 
at  an  absolute  auction  sale  the  value  of  the  property 
is  not  necessarily  what  expert  appraisers  would  rate 
it,  but  no  more  nor  less  than  what  it  actually  brings 
from  the  block.  The  auctioneer,  in  sensing  when  tension 
is  getting  too  strong,  must,  therefore,  be  guided  by  his 
understanding  of  his  audience  and  what  they  will  finally 
bid  rather  than  by  any  preconceived  notion  of  appraisal 
value. 


RELATIONSHIP  BETWEEN  BROKER 

AND  CUSTOMER,  AND  LEGAL 

PRINCIPLES  INVOLVED 

ABRAHAM  STERN 

Employment  "of  Broker — Implied  Contracts—- 
What Entitles  to  Compensation — Agent's  Act  and 
Principal — Rights  of  Principal — Double  Employ- 
ment— Options — Purchaser's  Responsibility 

IN  discussing  the  subject  of  this  lecture  it  is  not  my 
intention  to  go  into  the  ethical  side  of  the  question. 
Like  every  other  business,  that  of  the  broker  is  or 
should  be  subject  to  the  same  rules  of  conduct  as  are 
applicable  to  any  other  vocation.  Good  faith  and  truth 
are  fundamental  principles,  applicable  to  the  relationship 
of  broker  and  principal  as  well  if  not  more  so  as  to  other 
pursuits,  and  in  the  long  run  the  broker  who  never  loses 
sight  of  this  fact  and  practices  it  will  succeed  in  inspiring 
confidence,  which  is  the  most  valuable  article  of  the 
broker's  stock  in  trade.  We  shall,  however,  in  the  lim- 
ited time  allotted  for  the  purpose,  discuss,  in  a  cursory 
manner,  the  legal  problems  involved  in  the  relationship 
of  principal  and  broker.  In  order  to  properly  understand 
the  subject  and  to  simplify  it  we  shall  divide  the  subject 
into  the  following  subdivisions  and  take  them  up  seri- 
atim: 
I.  The  employment  of  the  broker. 

16 


Broker  and  Customer 

II.  What  efforts  of  the  broker  will  entitle  him  to  com- 
pensation. 

III.  How  far  the  principal  is  bound  by  the  acts  of  the 
broker. 

IV.  The  rights  of  the  principal. 

The  Employment  of  the  Broker 

At  first  sight  it  would  appear  that  this  proposition  is 
a  very  simple  one,  and  about  which  there  ought  not  to 
be  much  dispute.  A  perusal  of  the  numerous  cases 
reported  in  the  law  reports  on  this  subject  will  readily 
convince  one  that  the  question  of  employment  has  been 
the  cause  of  very  fruitful  litigation.  It  may  be  asked, 
How  does  this  condition  of  affairs  arise?  The  answer 
thereto  is  that  the  eagerness  of  the  broker  to  effect  a  sale 
ofttimes  makes  him  lose  sight  of  the  first  necessary  step 
to  be  taken  to  insure  his  compensation.  It  is  a  funda- 
mental and  well  established  rule  of  law  that  the  employ- 
ment of  a  broker  in  case  of  a  dispute  must  be  proved 
either  by  a  direct  employment  or  by  proof  of  such  cir- 
cumstances as  will  imply  a  contract  of  employment.  It 
is  not  enough  for  a  broker  to  go  to  an  owner  and  tell 
him  that  he  has  a  customer  willing  to  purchase  his  prop- 
erty, get  the  terms  and  price  and  then  proceed  to  effect 
the  sale.  Judge  Woodruff,  in  the  case  of  Pierce  vs. 
Thomas,  4  E.  D.  Smith,  354,  concisely  states  the  legal 
principles  involved :  "To  entitle  a  broker  to  recover  com- 
missions for  effecting  a  sale  of  real  estate,  it  is  indis- 
pensable that  he  was  employed  by  the  owner  to  make 
the  sale.  A  ratification  of  his  act,  where  original  em- 
ployment is  wanting  may  in  some  instances  be  equivalent 
to  an  original  retainer,  but  only  where  there  is  a  plain 

17 


Practical  Real  Estate  Methods 

intent  to  ratify.  An  owner  cannot  be  enticed  into  a 
liability  for  commissions  against  his  will.  A  mere  volun- 
teer without  authority  is  not  entitled  to  commissions, 
merely  because  he  has  inquired  the  price  which  an 
owner  asks  for  his  property  and  has  then  sent  a  person 
to  him  who  consents  to  take  it.  A  broker  has  no  better 
claim  to  recover  for  voluntary  service  rendered  without 
employment  and  not  received  and  acted  upon  by  the 
owner  as  rendered  in  his  behalf,  than  any  other  volun- 
teer." 

An  interesting  case  on  this  subject  is  one  involving 
the  sale  of  the  premises  at  the  northwest  corner  of 
Broadway  and  Thirty-fourth  Street,  being  the  small  par- 
cel adjoining  Macy's.  This  was  sold  for  three  hundred 
and  seventy-five  thousand  dollars.  The  broker  nego- 
tiating the  sale  called  upon  the  agents  of  the  owner,  who 
was  in  Europe,  and  informed  the  agent  that  he  had  a 
party  who  was  interested  in  the  property  and  desired 
to  purchase  it.  He  offered  three  hundred  and  twenty- 
five  thousand  dollars  for  it,  which  the  agent  declined, 
and  told  the  broker  that  nothing  less  than  three  hundred 
and  fifty  thousand  dollars  would  be  considered,  and  for 
the  broker  to  put  his  offer  in  writing,  and  that  upon  the 
owner's  return  from  Europe  the  offer  would  be  sub- 
mitted. Upon  the  owner's  return  the  parties  met,  and 
the  owner  demanded  three  hundred  and  seventy-five 
thousand  dollars,  and  the  broker  accepted  the  same  and 
the  transaction  was  consummated  and  the  deed  delivered. 
The  owner  declined  to  pay  any  commission,  claiming 
he  had  not  employed  the  broker,  that  the  latter  acted 
voluntarily  and  was  the  agent  of  the  purchaser.  The 
Higher  Courts  sustained  the  contention  of  the  owner, 
and  the  broker,  through  his  failure  to  ask  whether  the 

18 


Broker  and  Customer 

owner  would  pay  commission,  which  he,  no  doubt,  would 
have  agreed  to,  was  out  $3,750. 

It  is  very  difficult  to  define  exactly  what  circumstances 
will  raise  the  presumption  of  an  implied  contract,  where 
an  express  contract  is  not  shown.  If  the  owner  recog- 
nizes the  claim  by  offering  a  less  amount,  the  broker 
would  be  entitled  to  recover,  and  it  may  be  laid  down 
as  a  general  rule  that  any  act  upon  the  part  of  the 
owner  recognizing  the  claim  is  sufficient  to  raise  the 
presumption  of  an  implied  contract  to  pay.  Proof  of 
a  general  custom  on  the  part  of  owners  to  pay  com- 
missions in  the  absence  of  an  express  contract,  so  to  do, 
is  not  sufficient  to  establish  the  liability  of  the  owner. 
Such  a  custom  cannot  fasten  upon  a  property  owner 
any  liability  as  the  employer  of  a  broker  simply  because 
he  consents  to  sell  his  property  to  someone  and  is  in- 
duced to  sell  it  through  the  agency  of  the  broker  with- 
out any  request  express  or  implied  on  the  part  of  the 
owner.  This  was  expressly  decided  in  the  case  of  Brady 
vs.  American  Machine  Co.,  86  App.  Div.  Rep.,  267.  You 
will,  therefore,  see  the  importance  of  the  first  step  in 
undertaking  negotiations  to  get  an  unequivocal  promise 
to  pay  the  commissions.  Another  element  of  uncertainty 
has  arisen  of  late  which  makes  the  vocation  of  the  broker 
far  from  a  pleasant  one  and  which  impedes  his  efforts 
with  entanglements  and  difficulties.  Assuming  that  he 
has  received  an  express  promise,  he  is  met  with  the 
further  obstacle  that  the  owner  never  authorized  the 
broker  in  writing  to  offer  the  property.  In  1901  an  Act 
was  passed  making  it  a  misdemeanor  for  the  broker  to 
offer  the  property  of  an  owner,  unless  the  authority  so 
to  do  is  given  in  writing,  this  to  apply  to  cities  of  the 
first  and  second  class  only  and  not  the  rest  of  the  State. 

19 


Practical  Real  Estate  Methods 

This  Act  is  highly  penal  in  its  nature ;  its  enactment  was 
no  doubt  caused  by  the  numerous  suits  brought  by 
unscrupulous  persons,  claiming  to  have  acted  for  the 
principal,  and  by  reason  of  the  frequency  of  false  swear- 
ing in  court,  in  order  to  obtain  the  compensation.  There, 
no  doubt,  was  much  reason  and  provocation  for  its 
enactment,  but,  in  my  opinion,  the  prevention  of  the 
evil  complained  of  could  have  been  accomplished  in  a 
manner  much  more  efficient  and  without  causing  the 
serious  consequences  entailed,  by  passing  a  statute  sim- 
ilar to  the  one  existing  in  New  Jersey,  where  the  promise 
to  pay  must  be  in  writing. 

The  Act  as  it  now  stands  has  caused  as  much  litigation 
as  its  passage  endeavored  to  prevent.  As  matters  now 
stand  the  Appellate  Court  in  the  Second  Department  has 
declared  the  Act  to  be  unconstitutional,  while  the  Appel- 
late Division  in  this  Department  has  declared  otherwise. 
As  the  Act  is  a  penal  one,  it  will  be  strictly  construed. 
It  is  not  necessary  that  the  authority  required  by  the  Act 
should  be  in  "any  prescribed  form.  Any  memorandum 
from  which  such  authority  can  be  spelled  out  will  be 
sufficient.  A  card  or  other  memorandum  upon  which 
the  owner  has  set  forth  the  price,  terms  and  dimensions, 
however  informal,  will  be  sufficient,  without  setting  forth 
in  express  terms  the  authorization. 

What  Efforts  Entitle  to  Compensation 

Having  started  out  aright,  and  obtained  the  written 
authority,  provided  for  as  above  stated,  what  steps  must 
the  broker  next  take  to  earn  his  commission?  It  is  of 
the  utmost  importance,  in  order  to  save  future  trouble 
and  litigation,  to  get  all  of  the  particulars  affecting  the 

20 


Broker  and  Customer 

parcel  to  be  sold  definitely  and  positively.  These  consist, 
in  the  first  place,  of  the  ownership ;  next,  the  dimensions 
of  the  parcels;  third,  restrictions,  if  any,  affecting  the 
property,  and,  fourth,  the  terms  of  sale. 

Ownership  —  There  are  many  persons  acting  in  a 
representative  capacity,  such  as  executors,  trustees  and 
attorneys  in  fact,  who  derive  their  title  through  wills, 
trust  deeds  or  powers  of  attorney.  It  is  remarkable  how 
many  of  these  persons  offer  property  without  first  con- 
sulting competent  legal  counsel,  only  to  find  out,  when 
all  negotiations  have  ended  satisfactorily,  that  the  in- 
dividual has  no  right  or  power  to  sell,  and  the  broker's 
labors  have  been  in  vain.  It  should  be  ascertained  at 
the  outset  whether  such  power  to  sell  exists  and  whether 
the  terms  of  the  will  or  other  instrument  involved  are 
legal  and  sufficiently  explicit  to  effect  the  sale  and  pre- 
vent litigation;  this,  of  course,  should  be  ascertained  by 
the  owner. 

Dimensions  —  This  fact  can  be  easily  ascertained  by 
an  examination  of  the  deed,  or,  in  case  the  deed  cannot 
be  procured,  by  an  examination  of  the  records.  An 
unintentional  misrepresentation  by  the  owner  as  to  the 
size  of  the  plot  does  not  amount  to  a  warranty,  and  the 
owner  is  not  liable  for  commissions,  although  the  pur- 
chaser is  willing  and  ready  to  purchase  and  the  price 
has  been  agreed  upon,  but  is  unwilling  to  enter  into  a 
contract  upon  ascertaining  that  the  dimensions  are  not 
as  they  had  been  represented.  An  owner  through  error 
represented  his  property  to  be  fifty  feet  front  and  seventy- 
six  feet  deep ;  negotiations  had  been  carried  on  for  some 
time  and  finally  the  price  and  all  other  terms  were 
agreed  upon.  Upon  examining  the  deed  for  the  purpose 
of  drawing  the  contract,  it  was  ascertained  that  the  plot 

21 


Practical  Real  Estate  Methods 

was  only  sixty-six  feet  deep,  and  as  the  purchaser  de- 
clined to  enter  into  a  contract,  suit  was  brought  against 
the  owner  for  commission,  and  the  court  decided  that 
the  owner  was  not  liable.  Hausman  vs.  Herdtfelder, 
81  App.  Div.,  46.  An  examination  of  the  deed  in  the 
first  instance  would  have  prevented  much  trouble  and 
litigation. 

Of  equal,  if  not  more,  importance  it  is  to  ascertain 
whether  any  restrictive  covenants  against  erecting  any 
kind  of  building  or  tenement  exist,  or  whether  there  are 
any  restrictions  to  using  the  entire  lot  for  building  pur- 
poses. This  can  as  a  rule  be  ascertained  by  an  examina- 
tion of  the  deed  or  abstract.  As  to  the  terms  of  sale, 
whether  all  cash,  or  whether  the  property  is  subject  to 
mortgages  or  leases,  it  is  hardly  necessary  for  me  to 
discuss  how  important  it  is  to  get  these  matters  in  proper 
shape  before  negotiations  are  undertaken.  Assuming 
that  all  of  the  foregoing  matters  have  been  satisfactorily 
arranged,  we  come  to  discuss  the  next  question.  What 
efforts  of  the  broker  will  entitle  him  to  compensation? 
It  is  a  fundamental  principle  of  law  that  the  broker 
must  be  the  procuring  cause  of  the  sale;  that  he  must 
bring  the  minds  of  the  seller  and  purchaser  together, 
and  that  through  his  efforts  they  have  agreed  upon  all 
the  terms  and  conditions  imposed  by  the  vendor.  Having 
accomplished  this,  he  is  entitled  to  his  compensation, 
even  if  the  sale  is  not  consummated  by  reason  of  any 
act  or  fault  of  the  principal.  While  a  contract  for  the 
sale  of  real  estate  to  be  binding  must  be  in  writing,  yet 
an  agent  who  has  been  authorized  to  make  the  sale  at 
a  certain  price  earns  his  commission  when  he  has  pro- 
cured a  purchaser  ready  and  willing  to  purchase  at  the 
terms  fixed,  with  whom  the  vendor  refuses  to  contract 

22 


Broker  and  Customer 

or  to  whom  he  refuses  to  convey  upon  payment.  It  is 
indispensable  that  the  minds  of  the  contracting  parties 
should  meet,  before  the  broker  is  entitled  to  commission. 
This  is  illustrated  more  particularly  by  the  following  case. 

When  the  Owner  Changes  His  Mind. 

A  broker  employed  by  the  owner  of  a  parcel  of  real 
estate,  in  New  York  City,  secured  a  purchaser  who 
agreed  to  buy  the  property  at  the  owner's  price,  and 
made  a  cash  deposit  thereon  on  the  loth  day  of  Sep- 
tember, 1902.  On  the  1 5th  day  of  September,  1902, 
when  the  parties  met  for  the  purpose  of  executing  the 
formal  contract  of  sale,  the  proposed  purchaser  asked 
for  a  reasonable  time  in  which  to  examine  the  title  before 
taking  the  deed.  The  owner,  who  was  expected  to  give 
a  warranty  deed,  consented  to  grant  the  necessary  time, 
but  insisted,  as  the  time  suggested  would  extend  over 
the  date  when  the  taxes  would  become  a  lien  on  the 
property,  viz.,  October  6th,  1902,  the  contract  should 
contain  a  clause  requiring  the  purchaser  to  pay  such 
taxes.  The  purchaser  refused  to  assent  to  insert  such 
clause,  and  solely  because  of  such  refusal  the  negotia- 
tions were  terminated.  It  was  held  that  the  owner  was 
not  liable  and  was  justified  in  demanding  the  insertion 
of  such  clause.  The  broker  is  never  entitled  to  com- 
mission for  unsuccessful  efforts.  The  reward  comes  only 
with  success.  He  may  have  introduced  to  each  other 
parties  who  otherwise  would  never  have  met;  he  may 
have  created  impressions  which  under  later  and  more 
favorable  circumstances  naturally  lead  to  and  materially 
assist  in  the  consummation  of  a  sale;  he  may  have 
planted  the  very  seeds  from  which  others  reap  the  har- 

23 


Practical  Real  Estate  Methods 

vest,  but  all  that  gives  him  no  claim.  It  is  part  of  his 
risk  that,  failing  himself  and  not  successful  in  fulfilling 
his  obligations,  others  might  be  left  to  some  extent  to 
avail  themselves  of  the  fruit  of  his  labors.  In  such  a 
case  the  principal  violates  no  right  of  the  broker  by 
selling  to  the  first  party  who  offers  the  price  asked,  and 
it  matters  not  if  the  sale  is  to  the  very  party  with  whom 
the  broker  had  been  negotiating.  This,  however,  must 
be  taken  with  one  important  and  necessary  limitation. 
If  the  efforts  of  the  broker  are  rendered  a  failure  by 
the  fault  of  the  employer;  if  capriciously  he  changes  his 
mind  after  the  purchaser,  ready  and  willing  and  con- 
senting to  the  prescribed  terms,  is  produced,  or  if  the 
latter  declines  to  complete  the  contract  because  of  some 
defect  of  title  in  the  ownership  of  the  seller,  then  the 
broker  does  not  lose  his  commission. 

One  other  principle  underlying  the  relationship  of 
owner  and  broker  is,  where  no  time  is  fixed  for  the 
continuance  of  the  employment,  either  party  is  at  liberty 
to  terminate  it  at  will,  subject  only  to  the  ordinary 
requirements  of  good  faith.  Usually  the  broker  is  en- 
titled to  a  fair  and  reasonable  opportunity  to  perform 
his  obligations,  subject  to  the  right  of  the  seller  to  sell 
independently.  This  right  having  been  granted  him,  the 
right  of  the  owner  to  terminate  the  employment  is  ab- 
solute, except  that  he  may  not  do  so  in  bad  faith  and 
as  a  mere  device  to  deprive  the  broker  of  the  fruits  of 
his  labor.  Thus,  if  in  the  midst  of  negotiations,  and 
while  the  broker  is  about  succeeding  in  his  negotiations, 
the  seller  should  revoke  his  authority,  with  the  view  of 
concluding  the  bargain  himself  and  avoiding  the  pay- 
ment of  commissions,  it  might  well  be  said  that  the  due 
performance  of  the  contract  was  prevented  by  the  prin- 

24 


Broker  and  Customer 

cipal,  but  acting  in  good  faith  as  above  stated,  the  right 
to  revoke  is  absolute,  otherwise  the  contract  would  be 
extended  indefinitely  and  no  man  could  know  when  he 
was  freed  from  the  obligation.  The  leading  case  upon 
this  subject  is  —  Sibbold  vs.  Bethlehem  Iron  Co.,  83, 
N.  Y.,  276. 

If  the  owner  is  willing  to  sell,  and  requests  the  broker 
to  bring  the  purchaser  to  him,  and  the  latter  declines 
to  negotiate  through  the  broker,  is  the  owner  at  liberty 
to  negotiate  with  the  same  purchaser  through  another 
broker?  The  late  case  of  Sampson  vs.  Ottinger  has 
decided  this  question  in  the  affirmative.  In  that  case  the 
broker  had  conversations  with  the  owners  and  informed 
them  that  he  had  a  party  willing  to  purchase  the  owners' 
property.  The  owners  requested  the  broker  to  bring 
the  intending  purchasers  to  them,  in  order  to  settle  the 
terms  of  the  transaction,  as  there  was  a  building  loan 
to  be  made.  The  purchasers  declined  to  have  anything 
to  do  with  the  broker  or  to  enter  into  any  negotiations 
with  the  owners  through  this  broker,  and  the  broker 
never  produced  his  parties,  but  gave  to  the  owners  the 
names  of  the  intending  purchasers.  The  owners  never 
repudiated  the  employment  of  the  broker  and  were  will- 
ing to  have  him  act  if  he  could  bring  the  parties  together. 
This  he  failed  to  do,  and  the  owners  subsequently, 
through  the  efforts  of  other  brokers,  came  into  nego- 
tiations with  the  purchasers  and  sold  the  property.  Under 
these  circumstances  the  court  held  that  it  could  not  be 
said  that  the  owners  interfered  with  the  broker,  so  that 
the  latter  could  not  accomplish  the  purpose  for  which 
he  was  employed:  having  been  requested  to  bring  the 
parties  together  and  having  failed  to  do  so  without  any 
fault  on  the  part  of  the  owners,  he  failed  to  perform 

25 


Practical  Real  Estate  Methods 

his  contract,  and  having  so  failed,  the  owners  were  at 
liberty  to  negotiate  either  personally  or  through  other 
brokers,  the  purchasers  having  failed  to  agree  upon 
terms  or  have  anything  to  do  with  the  broker.  The 
employer  violates  no  right  of  the-  broker  in  negotiating 
directly  with  a  proposed  customer,  after  the  broker  has 
failed  to  bring  such  customer  to  specified  terms,  nor  is 
he  liable  for  commissions  under  such  circumstances  if 
the  owner's  independent  negotiations  result  in  a  sale. 

We  do  not  mean  to  hold  that  the  broker  must  of 
necessity  be  present  and  an  active  participator  in  the 
agreement  of  buyer  and  seller  when  that  agreement  is 
actually  concluded.  He  may  just  as  effectually  produce 
and  create  the  agreement,  though  absent  when  it  is 
completed,  and  taking  no  part  in  the  arrangements  of 
the  final  details,  but  it  must  be  through  his  efforts  that 
the  deal  is  closed.  How  far  the  courts  have  gone  in 
laying  down  this  principle  is  aptly  illustrated  in  the  case 
of  Sibbold  vs.  Bethlehem  Iron  Co.  The  Iron  Company 
employed  the  broker  to  sell  steel  rails  to  the  G.  T.  R.  R. 
Co.  The  broker  had  several  interviews  with  the  com- 
pany, and  negotiations  were  carried  on  during  a  period 
of  four  months;  the  Iron  Company  during  this  period 
had  fixed  its  prices  several  times.  The  broker  received 
a  telegram  from  the  Railroad  Company  asking  upon 
what  terms  the  Iron  Company  would  deliver  rails  (1,000 
tons)  ;  the  broker  telephoned  to  the  Iron  Company  asking 
its  lowest  terms.  The  Iron  Company  declined  to  fix  a 
price  or  to  negotiate  further  through  the  broker,  and 
the  latter  thereupon  telegraphed  to  the  Railroad  Com- 
pany that  the  Iron  Company  declined  to  name  a  price. 
The  Iron  Company  thereupon  commenced  negotiations 
through  another  broker,  and  subsequently  a  sale  was 

26 


Broker  and  Customer 

made  by  the  Iron  Company  to  the  Railroad  Company 
through  this  other  broker.  Upon  the  trial  of  the  action 
for  the  commissions  of  the  first  broker,  the  Court  below 
held  that  the  Iron  Company  had  no  right  either  in  good 
or  bad  faith  to  avail  itself  of  what  the  first  broker  had 
done  to  make  a  sale  through  other  agencies.  On  appeal 
it  was  held  that  the  Iron  Company  had  the  right  to 
terminate  the  agency  as  it  did,  and,  if  done  in  good  faith, 
the  first  broker  had  no  right  to  compensation,  although 
his  efforts  were  of  benefit  to  the  subsequent  successful 
negotiations 

In  another  case,  Wylie  vs.  The  Marine  Bank,  the  bank 
had  its  building  in  the  market  for  sale.  The  plaintiff, 
the  broker,  went  to  one  of  the  officers  of  the  bank  and 
informed  him  that  he  had  a  purchaser ;  he  was  informed 
that  the  price  asked  was  $80,000  and  that  if  he  sold  it 
they  would  pay  commissions.  He  reported  the  price  to 
his  customer,  who  authorized  an  offer  of  $75,000.  This 
offer  was  reported  to  the  bank,  a  meeting  of  the  directors 
was  called,  and  it  was  decided  to  sell  at  not  less  than 
$80,000.  This  was  communicated  to  the  broker,  who 
reported  it  to  the  intending  purchaser.  The  latter  de- 
clined to  raise  his  bid,  and  the  broker  so  reported  to  the 
bank.  The  following  day  the  purchaser  heard,  through 
other  sources,  that  other  parties  were  after  the  building, 
and,  hearing  that  one  Pond  was  a  dealer  with  the  bank, 
they  procured  him  to  go  to  the  bank  and  see  how  mat- 
ters stood  and  what  he  could  do;  in  the  meantime  the 
first  broker  did  nothing  further  in  the  matter  and  was 
unaware  of  the  intrusion  of  Pond.  The  latter  reported 
to  the  purchaser  that  there  was  an  offer  of  $77,500,  but 
that  nothing  less  than  $80,000  would  buy  it.  The  pur- 
chaser then  authorized  Pond  to  offer  that  sum,  and  the 

27 


Practical  Real  Estate  Methods 

deal  was  closed.     The  Court  of  Appeals  held  that  the 
first  broker  was  not  entitled  to  any  compensation. 


How  Far  Principal  Is  Bound  by  Agent 

If  the  agent  makes  any  material  misrepresentations, 
as  for  instance,  the  amount  of  rent,  or  any  other  state- 
ment which  the  purchaser  relies  on  and  is  induced  to 
purchase  the  property  by  reason  thereof,  and  such  mis- 
representations should  turn  out  to  be  untrue,  the  pur- 
chaser is  entitled  to  relief  and  if  he  has  entered  into  a 
contract  may  rescind  the  same,  and  if  the  deed  has  been 
delivered  and  the  deal  consummated,  is  entitled  to  have 
the  sale  cancelled  and  be  restored  to  his  original  posi- 
tion. And  this  is  so  whether  the  representations  were 
wilfully  made,  or  whether  innocently  made  without 
proper  knowledge  upon  the  part  of  the  agent,  and  it 
makes  no  difference  that  such  representations  were  made 
without  the  authority  of  the  principal  or  even  without 
his  knowledge,  no  matter  how  innocent  the  seller  may 
be  of  any  fraud  or  guilty  knowledge.  A  principal  cannot 
enjoy  the  fruits  of  the  bargain  without  adopting  all  the 
instrumentalities  employed  by  the  agent  in  bringing  it 
to  a  consummation.  If  an  agent  defrauds  the  person 
with  whom  he  is  dealing,  the  principal,  not  having  au- 
thorized or  participated  in  the  wrong,  may  no  doubt 
rescind,  when  he  discovers  the  fraud,  on  the  terms  of 
making  complete  restitution.  But  so  long  as  he  retains 
the  benefits  of  the  deal  he  cannot  claim  immunity  on 
the  ground  that  the  fraud  was  committed  by  his  agent 
and  not  by  himself — Bennett  vs.  Judson,  21,  N.  Y.,  238. 

The  rule  is  that  the  receipt  and  retention  by  the  prin- 
cipal of  the  fruit  and  product  of  the  fraud  of  the  agent 

28 


Broker  and  Customer 

renders  the  principal  liable,  though  innocent  of  participa- 
tion in  the  wrong.  In  a  transaction  involving  the  ex- 
change of  properties,  the  owner  of  one  of  the  parcels 
was  told  by  the  broker  that  the  owner  of  the  other  parcel 
offered  in  trade  had  actually  paid  in  cash  twelve  thou- 
sand dollars  for  it,  and  to  prove  it  he  exhibited  to  her 
the  deed  executed  by  the  executors,  in  which  the  con- 
sideration was  stated  at  $12,000.  She,  believing  this 
statement  to  be  true,  made  the  trade,  and  upon  sub- 
sequent investigation  it  was  ascertained  that  this  fact 
was  untrue;  that  the  consideration  inserted  in  the  deed 
was  fictitious,  that  the  actual  price  paid  for  it  within 
a  month  was  $7,000.  The  court  held  that  this  was  a 
misrepresentation  of  a  fact  and  not  merely  an  opinion 
as  to  the  value,  and  one  to  influence  a  purchaser,  and 
constituted  a  sufficient  basis  to  rescind  a  sale.  It  must 
not  be  understood  that  a  mere  statement  of  the  agent 
or  of  the  owner  of  the  value  of  the  property  would  con- 
stitute a  misrepresentation;  a  false  statement  as  to  the 
value  of  property  made  by  a  vendor  for  the  purpose  of 
obtaining  a  higher  price  than  he  knows  the  property 
is  worth  will  not  sustain  an  action  for  fraud  or  entitle 
the  purchaser  to  rescind  a  contract.  The  purchaser  must 
rely  upon  his  own  judgment  as  to  value,  but  this  state- 
ment is  to  be  distinguished  from  the  case  where  the 
false  statement  is  of  an  actual  fact  as  above  stated.  It 
is  also  a  well  settled  rule  of  law  that  if  the  owner  is 
induced  to  execute  a  contract  of  sale  by  reason  of  mis- 
representations made  by  his  own  agent  the  latter  is  not 
entitled  to  commissions,  although  the  owner  carries  out 
the  contract. 

In  reading  of  the  large  deals  in  real  estate  made  at 
the  present  day,  we  are  apt  to  believe  that  they  are 

29 


Practical  Real  Estate  Methods 

unprecedented,  and  that  they  are  evidence  of  a  progress- 
ive age,  or  undue  speculation;  so,  also  the  manner  in 
which  such  lands  are  purchased,  and  the  want  of  proper 
investigation  as  to  the  availability  of  land  for  particular 
purposes  by  intending  purchasers.  An  examination  of 
cases  decided  in  the  courts  in  the  early  part  of  the  last 
century  convinces  one  that  the  same  spirit  of  speculation 
existed  then  as  now,  if  not  on  a  larger  scale,  as  is  shown 
by  the  opinion  given  in  a  case  decided  nearly  seventy 
years  ago.  A  person  offered  lands  for  sale  by  the  acre, 
near  the  city,  and  represented  that  the  same  was  adapted 
to  be  laid  out  into  city  lots,  free  from  rock,  and  level 
and  graded,  and  said  that  it  actually  cost  $32,000,  and 
induced  the  purchaser  to  take  a  large  interest  in  the 
property  at  that  price.  The  purchaser  relied  upon  these 
statements  and  never  examined  the  property;  the  repre- 
sentations turned  out  to  be  false,  as  the  property  only 
cost  $16,000  and  was  hilly  and  not  graded  and  full  of 
rock.  In  an  action  brought  to  rescind  the  sale  on  the 
ground  of  these  misrepresentations,  Judge  Bronson,  one 
of  the  ablest  judges  this  State  has  ever  had,  states:  "It 
will  seem  marvelous  if  not  wholly  incredible  to  those 
who  do  not  live  in  the  years  1835  and  1836  that  men 
should  purchase  land  lying  within  a  few  hours'  ride  of 
their  residence  and  agree  to  pay  thirty-two  thousand 
dollars  for  it,  without  ever  having  taken  the  trouble  to 
look  at  the  property  either  in  person  or  by  an  agent. 
But  farms  lying  in  the  vicinity  of  cities  and  villages 
were  then  so  much  in  demand  for  the  building  of  new 
towns  that  many  persons  thought  it  best  not  to  hazard 
the  loss  of  a  bargain  by  stopping  to  look  or  inquire. 
They  might  better  lose  tfee  little  sum  of  $32,000  than 
be  absent  one  whole  day  from  Wall  Street,  and  thus  miss 

30 


Broker  and  Customer 

the  possible  chance  of  purchasing  the  site  of  some  other 
prospective  city  of  much  greater  magnitude.  Wonderful 
as  it  may  seem  to  the  next  generation,  such  things  did 
happen."  In  view  of  the  speculation  now  going  on, 
were  the  judge  living  now,  he  would  only  see  a  repeti- 
tion of  what  happened  in  his  own  time.  In  that  case 
the  purchaser  was  relieved  of  his  contract,  the  Court 
saying  the  credulity  of  the  purchaser  furnishes  but  a 
poor  excuse  for  the  falsehood  and  fraud  of  the  seller; 
the  latter  will  have  no  just  ground  for  complaint  if  he 
is  held  responsible  for  his  misconduct. 

It  is  not  every  false  affirmation  of  the  vendor  which 
will  give  the  vendee  an  action,  although  he  may  be  de- 
ceived by  it.  It  often  happens  in  the  making  of  bar- 
gains that  many  things  are  said  which  neither  party 
regards  of  much  consequence;  and  if  the  buyer  trusts 
to  representations  which  were  not  calculated  to  impress 
upon  a  man  of  ordinary  prudence ;  or  if  he  neglects  the 
means  of  information  easily  within  his  reach,  it  is  better 
that  he  should  suffer  the  consequences  of  his  own  folly 
than  to  give  him  an  action  against  the  seller.  It  is  dif- 
ficult to  lay  down  a  general  rule  on  this  subject.  It  may 
be  stated  generally,  however,  that  where  it  is  imprac- 
ticable for  the  purchaser  to  ascertain  the  truth  upon 
investigation,  or  where  the  seller  -  by  his  acts  prevents 
a  proper  investigation  on  the  part  of  the  buyer,  or  the 
fact  is  within  the  personal  knowledge  of  the  seller,  then 
the  representations  are  material,  and,  if  false,  the  pur- 
chaser will  be  relieved.  If  the  broker  is  employed  in 
an  exchange  to  ascertain  the  rents  of  one  of  the  parcels 
offered  in  trade,  and  the  broker  procures  an  erroneous 
statement  thereof,  though  believing  it  to  be  true,  which 
the  principal  relies  on,  and  contracts  to  exchange  the 

31 


Practical  Real  Estate  Methods 

property,  but  rescinds  the  contract  after  learning  the 
facts,  the  broker  is  not  entitled  to  commissions.  Having 
employed  the  broker  to  ascertain  the  rents,  the  principal 
was  under  no  obligation  to  make  a  personal  investiga- 
tion. The  information  obtained  being  of  no  value  to 
the  principal,  he  was  misled  thereby  into  executing 
a  contract,  which,  because  the  misrepresentations  were 
also  chargeable  to  the  owners  of  the  other  parcel,  was 
not  enforcible  against  the  principal.  To  allow  a  broker 
to  recover  commissions  on  these  facts  would  be  in- 
equitable and  cannot  be  sustained  on  any  principle  of 
law,  and  it  is  immaterial  that  the  error  was  unintentional 
and  without  fraud. 


Rights  of  Principal 

The  principal  has  the  right  to  demand  from  the  broker 
his  best  efforts,  and  that  he  should  be  faithful  and  true 
to  his  employer,  and  exert  every  possible  means  and 
make  the  best  possible  efforts  to  serve  his  principal  most 
advantageously.  The  relationship  of  principal  and  broker 
is  one  of  trust  and  confidence,  and  from  such  relationship 
spring  the  rules  governing  the  conduct  of  persons  stand- 
ing in  similar  positions.  If  an  attorney  is  employed  by 
a  client  in  any  litigation  or  other  business,  it  is  expected 
that  he  protect  his  client,  and  any  betrayal  of  his  trust 
is  visited  with  the  severest  punishment.  So,  in  every 
other  employment,  the  employee,  if  he  desires  to  succeed, 
owes  his  allegiance  to  his  employer.  If  I  employ  a 
broker  and  pay  him  for  his  service,  I  am  entitled  to  the 
benefit  of  his  knowledge,  experience  and  any  informa- 
tion he  procures  or  possesses.  It  is  his  duty  to  sell  my 
property  for  the  very  highest  price  he  can  procure.  If 

32 


Broker  and  Customer 

the  broker  has  any  knowledge  or  information  that  a 
particular  parcel  owned  by  me  is  desired  for  a  particular 
purpose,  it  is  his  duty  to  impart  that  information  to  me. 
If,  for  instance,  a  railroad  company  needs  a  large  tract 
of  land  for  the  purpose  of  a  station  or  other  improve- 
ment, and  the  broker  knows  that  the  company  has  or  is 
about  to  purchase  adjoining  property,  if  he  expects  to 
be  paid  by  me  for  selling  my  property,  it  is  his  duty  to 
impart  that  information.  An  agent  is  held  to  the  utmost 
good  faith  in  his  dealings  with  his  principal.  If  he  acts 
adversely  to  his  employer  in  any  part  of  the  transaction, 
or  omits  to  disclose  any  interest  which  would  naturally 
influence  his  conduct  in  dealing  with  the  subject  of  the 
employment,  it  is  such  a  fraud  upon  his  principal  as 
forfeits  any  right  to  compensation  for  his  services. — 
Murray  vs.  Beard,  102  N.  Y.,  505. 

If  an  agent  acts  adversely  to  his  employer  in  any  part 
of  the  transaction,  or  omits  to  disclose  any  interest  which 
would  naturally  influence  his  conduct  in  dealing  with 
the  subject  of  the  employment,  it  amounts  to  such  a 
fraud  upon  the  principal  as  to  forfeit  any  right  to  com- 
pensation for  services.  It  is  an  elementary  principle 
that  an  agent  cannot  take  upon  himself  incompatible 
duties  or  act  in  a  transaction  in  which  he  has  adverse 
interest  or  employment.  In  such  a  case  he  must  nec- 
essarily be  unfaithful  to  one  or  the  other,  as  the  duties 
which  he  owes  his  respective  principal  are  conflicting 
and  incapable  of  faithful  performance  by  the  same  per- 
son. If  he  is  the  owner  himself  or  has  an  interest  in 
the  property  which  he  offers  he  cannot  claim  any  com- 
pensation. And  if  he  is  in  reality  the  purchaser,  although 
the  transaction  is  done  through  a  third  person,  the  owner, 
upon  obtaining  the  truth,  may  rescind,  and  the  broker 

33 


Practical  Real  Estate  Methods 

forfeits  all  compensation.  In  one  case  a  lady  acquired 
title  to  certain  premises  at  a  foreclosure  sale.  She  en- 
trusted a  broker  who  had  done  business  for  her  to  collect 
the  rents,  and  at  the  same  time  authorized  him  to  sell 
the  premises.  Offers  had  been  made  for  the  property, 
which  the  broker  advised  her  to  decline.  After  a  while 
the  broker  informed  her  that  one  Jones  would  purchase 
the  property  for  $10,000,  and  the  broker  urged  her  to 
accept  this  offer;  she  finally  consented  to  make  the  sale 
and  entered  into  a  written  contract  with  Jones,  whereby 
she  agreed  to  sell  for  $10,000.  The  deed  was  taken  in 
the  name  of  the  broker  instead  of  Jones,  and  a  mortgage 
was  executed  by  the  broker  and  retained  by  him  to  be 
placed  on  record.  The  owner  claimed  that  she  was 
cheated,  that  she  did  not  know  she  was  selling  the  prop- 
erty to  the  broker,  but  supposed  that  Jones  was  the 
grantee.  She  brought  an  action  to  rescind  the  sale  and 
the  deed  was  set  aside. — Clark  vs.  Bird,  66  App.  Div.,  284. 

Double  Employment 

Naturally  following  from  the  principles  above  laid 
down  is  the  doctrine  that  a  broker  is  not  entitled  to  com- 
pensation from  both  principals,  without  their  knowledge 
and  consent.  This  state  of  affairs  arises  most  frequently 
in  cases  of  exchange  of  property  between  different  own- 
ers, where  one  broker  represents  both  parties.  If  the 
broker  in  such  a  case  is  invested  with  the  least  discretion 
by  either  party  he  cannot  accept  compensation  from  both 
without  the  consent  and  knowledge  of  both  principals. 
The  rules  of  law  are  well  settled  upon  this  subject  and 
have  already  been  referred  to.  There  are,  however,  a 
class  of  men  who  are  distinguished  from  brokers,  at 

34 


Broker  and  Customer 

least  in  the  law,  to  which  this  rule  of  law  does  not  apply. 
These  are  known  as  middlemen,  and  their  duties  are 
clearly  distinguished  from  those  of  an  ordinary  broker. 
A  middleman  may  be  defined  to  be  one  who  is  employed 
by  both  parties,  not  for  the  purpose  of  effecting  a  sale, 
or  consummating  a  deal,  but  solely  for  the  purpose  of 
bringing  the  parties  together,  or  of  opening  negotiations 
between  prospective  buyers  and  sellers.  Having  accom- 
plished this  purpose,  his  functions  are  ended  and  his 
compensation  is  earned;  the  amount  thereof  is  generally 
fixed  by  preliminary  agreement.  It  will  be  observed  that 
there  is  a  marked  distinction  between  the  two  vocations. 
In  the  case  of  a  middleman,  he  is  not  invested  with  any 
discretion  whatever;  he  is  not  employed  to  fix  the  price 
or  terms,  or  effect  the  sale.  All  of  these  elements  are 
left  for  the  principals  to  work  out  themselves.  Of  course, 
in  such  case  the  rule  preventing  compensation  from  both 
parties  cannot  apply,  because  the  principals  are  dealing 
directly  with  each  other,  and  no  relation  of  trust  or  con- 
fidence has  been  established  between  the  middleman  and 
principal  and  there  can  be  no  act  done  by  the  agent 
detrimental  to  either  party. 

It  is  often  very  difficult  to  determine  where  the  rela- 
tionship of  broker  ends  and  that  of  middleman  arises. 
As  a  middleman  sometimes  undertakes  to  go  further  than 
he  was  requested,  or  than  he  started  out  to  do,  and  takes 
part  in  the  negotiations,  it  is  under  these  circumstances 
that  uncertainty  arises.  The  whole  matter  depends  upon 
the  character  of  his  employment.  If  A  is  employed  by 
B  to  find  for  him  a  purchaser  for  his  house,  upon  terms 
and  conditions  to  be  determined  by  B,  when  he  meets 
a  purchaser,  I  can  see  nothing  improper  or  inconsistent 
with  any  duty  he  owes  B  for  A  to  accept  an  employment 

35 


Practical  Real  Estate  Methods 

from  C,  to  find  one  to  sell  his  house  to  C  upon  terms 
which  they  may  agree  upon  when  they  meet;  and  there 
is  no  violation  of  duty  in  such  case  in  agreeing  for  com- 
missions from  each  party,  upon  a  bargain  being  struck, 
or  in  failing  to  notify  each  party  of  his  employment  by 
the  other.  The  main  question  in  each  case  is,  was  the 
agent  invested  with  any  discretion,  and  did  the  principal 
rely  in  any  manner  upon  his  judgment  or  skill  or  con- 
fidence. If  the  latter  should  be  the  case,  he  cannot  act 
for  both  parties. 

Options 

An  option  is  a  privilege  which  the  owners  give  to  a 
person  to  purchase  the  premises  at  a  certain  price  and 
on  certain  terms.  If  nothing  is  paid  for  an  option  either 
in  money  or  other  consideration  it  is  void,  and  under  no 
circumstances  is  a  broker  entitled  to  a  commission  for 
procuring  an  option,  unless  the  same  is  valid,  or  is  finally 
consummated  by  a  sale.  It  often  happens  that  nego- 
tiations are  apparently  ended,  and  no  time  or  oppor- 
tunity is  available  to  embody  the  terms  in  a  precise  and 
definite  form,  and  a  small  deposit  is  paid  to  bind  the 
bargain.  If  under  such  circumstances  all  of  the  terms 
and  conditions  are  fully  determined  and  settled  upon, 
the  refusal  of  the  owner  to  enter  into  a  formal  contract 
cannot  deprive  the  broker  of  his  compensation.  But  if 
any  of  the  terms  are  left  in  doubt  or  to  be  subject  to 
further  consideration,  the  taking  of  the  deposit  and  giving 
of  an  informal  receipt  avails  nothing,  as  the  parties  have 
not  yet  arrived  at  that  stage  of  the  meeting  of  the  minds 
of  the  contracting  parties  which  the  law  calls  for.  Thus, 
in  one  case  negotiations  had  been  going  on  for  some 
time ;  the  parties  finally  came  to  a  bargain  and  the  owner 

36 


Broker  and  Customer 

received  a  deposit  of  fifty  dollars  and  gave  a  receipt  in 
the  following  form: 

June  6th,  1902. 

Received  from  J.  M.  Johnson  the  sum  of  Fifty  dollars 
on  account  of  contract,  price  of  $25,000  on  the  sale  of 
premises  No.  264  Delancey  Street,  $950  to  be  paid  on 
June  7th  and  $24,000  on  the  delivery  of  the  deed,  the 
contract  to  be  made  at  office  of  vendors'  attorney,  June 
7th,  at  12  o'clock  noon. 

The  intending  purchaser  never  made  any  further  pay- 
ment nor  even  entered  into  a  written  contract,  and  the 
owner  was  notified  that  the  purchaser  would  not  make 
any  further  payment.  The  receipt  was  signed  by  the 
owner  only.  It  contained  no  obligation  on  the  part  of 
the  purchaser  whatever.  The  Court  held  that  the  receipt 
was  a  nullity  and  did  not  amount  to  a  contract  and  could 
not  be  enforced  by  the  vendor  and  was  a  mere  option 
to  purchase  and  the  broker  was  not  entitled  to  any  com- 
pensation. 

In  another  case  the  parties,  after  negotiating  for  some 
time,  finally  agreed  upon  the  price  and  an  instrument 
was  drawn  whereby  the  owner  agreed  to  sell  the  premises 
at  $34,000  and  the  purchaser  agreed  to  buy  them  at  that 
price.  The  sum  of  fifty  dollars  was  paid  to  the  vendor 
to  bind  the  contract,  which  was  to  be  executed  at  the 
office  of  the  vendors'  attorney,  at  which  time  $1,000 
addition  was  to  be  paid,  $8,500  was  to  be  paid  on  the 
delivery  of  the  deed  and  $25,000  in  a  purchase  money 
mortgage.  This  agreement  was  signed  by  both  parties, 
the  seller  and  the  purchaser.  Subsequently  the  parties 
met  at  the  office  of  the  vendors'  attorney  to  enter  into 
a  formal  contract  and  were  unable  to  agree  upon  the 
terms  of  the  mortgage,  and  thereupon  the  purchaser 

37 


Practical  Real  Estate  Methods 

refused  to  enter  into  any  further  contract,  and  the  nego- 
tiations were  broken  off  and  were  never  resumed.  The 
question  arose  whether  the  said  written  instrument,  of 
itself,  was  or  was  not  an  enforcible  contract  for  the  sale 
and  purchase  of  the  real  estate  therein  referred  to.  It 
was  held  that  it  was  not  a  contract  upon  which  the 
vendors  could  rest  an  action  to  compel  the  vendee  to 
perform,  but  was  merely,  at  least  so  far  as  the  vendee 
was  concerned,  an  agreement  that  he  would  thereafter 
execute  a  contract  to  purchase  or  forfeit  the  fifty  dollars 
as  liquidated  damages.  In  other  words,  the  vendors  gave 
to  the  vendee  an  option,  good  until  the  meeting  at  which 
the  contract  was  to  be  executed,  and  the  paper  did 
not  constitute  a  contract  enforcible  against  the  vendee, 
because  it  was  too  indefinite  in  its  terms.  It  was  not 
stated  how  long  the  mortgage  was  to  run,  one,  two  or 
three  years;  what  rate  of  interest  it  should  contain,  and 
how  payable,  quarterly,  semi-annually,  annually,  or  at 
the  end  of  the  term.  Until  the  parties  had  agreed  upon 
these  details,  it  would  be  impossible  to  draw  such  mort- 
gage. No  court  would  have  jurisdiction  to  determine 
it  for  them.  And  upon  the  whole  case  it  was  decided 
that  the  broker  never  procured  a  complete  meeting  of 
the  minds  of  both  vendor  and  vendee,  either  in  writing 
or  by  parol,  or  part  one  and  part  the  other,  and  that 
consequently  he  had  never  earned  his  commissions. 

The  Responsibility  of  the  Purchaser 

We  have  seen  that  the  broker  is  obliged  to  produce 
a  customer  ready,  willing  and  able  to  comply  with  the 
terms  prescribed  by  the  vendor.  This  brings  up  for  dis- 
cussion the  question  whether  the  broker  is  entitled  to 

38 


Broker  and  Customer 

compensation  in  a  case  where  the  vendor  has  entered 
into  a  contract  with  a  purchaser  who  afterwards  turns 
out  to  be  financially  irresponsible.  As  a  general  rule, 
it  may  be  stated  that  where  the  vendor  enters  into  a 
contract  legally  binding  upon  both  parties  and  the  broker 
has  been  innocent  of  any  misrepresentations  of  the  re- 
sponsibility of  the  purchaser,  his  commission  is  earned, 
no  matter  how  worthless  the  purchaser  may  be;  and 
that  it  is  the  duty  of  the  principal  to  be  on  guard 
and  ascertain  the  financial  standing  and  ability  of  the 
party  with  whom  he  is  dealing.  In  a  late  case  the  broker 
effected  a  sale,  which  culminated  in  the  execution  of  a 
valid  contract  between  the  owner  and  the  purchaser.  The 
latter  paid  to  the  owner  on  account  of  the  sale  the  sum 
of  fifty  dollars,  the  purchase  price  being  ten  thousand 
dollars,  and  the  contract  was  actually  delivered  and  was 
in  proper  form  and  enforcible  by  either  party.  The 
purchaser  failed  to  carry  out  the  conditions  of  the  con- 
tract, and  suit  was  brought  against  hirn  by  the  owner 
for  damages,  and  judgment  was  obtained  against  him, 
which  was  uncollectable,  the  purchaser  being  financially 
irresponsible.  The  broker  sued  the  owner  for  his  com- 
mission. The  .Court  held  that  where  the  contract  was 
executed  between  the  employer  and  the  purchaser  the 
right  of  the  broker  to  his  commissions  does  not  depend 
upon  the  performance  of  the  contract  by  the  purchaser. 
If,  from  a  defect  in  the  title  of  the  vendor  or  from  a 
refusal  to  consummate  the  contract  upon  the  part  of  the 
purchaser  for  any  reason  attributable  to  the  owner,  the 
sale  falls  through,  nevertheless,  the  broker  is  entitled  to 
his  commission,  for  the  simple  reason  that  he  has  per- 
formed his  contract.  The  owner  having  entered  into  a 
contract  with  the  purchaser  and  received  fifty  dollars 

39 


Practical  Real  Estate  Methods 

upon  account  of  the  sale  is  in  no  position  to  urge  that 
the  broker  is  not  entitled  to  his  compensation.  The  law 
fixes  the  time  when  the  commissions  are  due  as  of  the 
date  when  the  broker  produces  to  his  principal  a  party 
with  whom  he  contracts.  His  acceptance  of  the  payment 
of  fifty  dollars  upon  the  contract  is  sufficient  in  law  to 
establish  that  the  contract  of  sale  was  made,  and  that  the 
broker  had  performed  his  part  of  the  contract  and  was 
entitled  to  his  commission. 

The  Compensatipn 

It  often  happens  that  after  the  negotiations  have  ended 
satisfactorily  to  the  owner,  and  the  parties  are  about  to 
enter  into  a  contract,  the  owner  holds  up  the  broker 
by  endeavoring  to  procure  a  reduction  in  the  commission 
and  refuses  to  enter  into  a  contract  unless  such  conces- 
sion is  made.  It  may  be  stated,  as  a  general  rule,  that 
if  the  broker,  under  such  circumstances,  makes  a  reduc- 
tion and  it  turns  out  that  the  contract  would  have  been 
made  without  such  reduction  having  been  acquiesced  in, 
such  modification  of  the  original  contract  for  com- 
mission made  with  the  owner  is  without  any  considera- 
tion in  law  and  is  void,  and  the  broker  is  entitled  to  his 
full  commission.  And  this  is  so  not  only  in  the  case  of 
a  reduction  in  the  amount  of  compensation,  but  also  in 
the  case  of  an  agreement  made  under  similar  circum- 
stances that  the  compensation  should  not  be  paid  until 
the  delivery  of  the  deed,  and  if  it  happens  that  the  deed, 
by  reason  of  any  fault  of  the  vendor,  is  not  delivered, 
the  broker,  notwithstanding  the  agreement  made  by  him, 
is  entitled  to  his  compensation.  If  the  owner  desires  to 
protect  himself  against  any  such  contingency,  he  must, 

40 


Broker  and  Customer 

in  the  first  instance  and  before  negotiations  are  started, 
make  an  agreement  with  the  broker  that  the  sale  shall 
be  conditioned  on  the  broker  waiving  commissions  in 
case  the  deed  is  not  delivered,  and  even  in  such  case  the 
broker  is  entitled  to  his  compensation  if  the  consum- 
mation of  the  contract  fails  by  reason  of  a  defect  in  the 
title  of  the  vendor  or  other  fault  on  his  part. 

In  conclusion  we  desire  to  state  that  we  have  endeav- 
ored to  present  in  a  cursory  way  but  few  of  the  many 
questions  that  may  arise  between  broker  and  principal. 
Many  of  these  questions  may  be  avoided  by  a  little  care 
and  investigation  on  the  part  of  both  parties.  A  person 
engaged  in  the  real  estate  business,  as  a  rule,  acts  equit- 
ably and  fairly  to  the  broker ;  his  assistance  is  ab- 
solutely necessary  to  the  profitable  carrying  on  of  his 
business,  and  he  cannot  afford  to  resist  payment  on 
technical  grounds.  And  a  reputable  broker  also  realizes 
that  he  cannot  gain  the  confidence  and  good  will  of  an 
owner  by  harassing  and  annoying  him  with  unjustifiable 
demands. 


LEASING 

ALBERT  B.  ASHFORTH 

Machinery  of  Leasing— Information  Systems- 
Danger  of  Delay — Nature  of  References — Writ- 
ten Agreements — Commission  Versus  Salary- 
General  Knowledge  Essential — On  Starting  for 
One's  Self 

To  be  an  expert  in  the  leasing  of  property,  whether 
for  residence  or  business  purposes,  one  must  be 
equipped  with  that  happy  faculty  of  quick  per- 
ception in  appreciating  the  requirements  of  the  individual 
and  must  also  know  how  to  exercise  more  than  usual 
tact  in  bringing  together  the  two  sides  in  a  transaction. 

The  usual  modus  operandi  employed  by  brokers  at  the 
present  time  is: 

1st: — Developing  the  listing  department  of  their  busi- 
ness, so  that  a  complete  memorandum  of  everything  to 
rent  in  what  they  consider  their  district  is  on  their  files. 

2nd: — Placing  as  far  as  possible  their  "To  let"  or 
"To  lease"  signs  on  the  properties. 

3rd: — Using  every  facility  the  records  may  give  and 
the  information  that  a  thorough  canvass  will  develop  to 
make  a  list  of  expirations  of  leases  in  a  special  book. 

This  book  should  be  made  up  somewhat  as  follows : 

Date  Expira'n  |  Address]  Tenant  |  Line  Business]  Space  Used]  Size  [Rent  [Remarks 

Under  heading  Remarks,  as  full  details  as  possible 
should  be  noted  as  to  possible  requirements  or  any  other 

42 


Leasing 

interesting  facts  connected  with  the  possible  wants  of 
the  prospective  tenant. 

With  such  a  record  equipment  it  should  be  possible 
to  pick  up  many  a  good  commission.  The  tenants  on 
your  list  should  be  seen  at  least  six  months  prior  to  the 
expiration  of  their  leases,  as  most  businesses  must  make 
arrangements  for  trade  that  far  or  even  farther  ahead. 

Nothing  is  so  exasperating  as  to  call  on  a  tenant  three 
months  prior  to  the  expiration  of  his  lease — the  time 
for  him  to  notify  his  landlord  whether  or  not  he  wishes 
to  renew — only  to  learn  that  he  has  leased  two  months 
ago  such  and  such  a  place  for  a  long  period  of  years, 
perhaps  the  very  property  you  had  on  your  books  and 
thought  to  offer. 

The  hardest  lesson  for  the  beginner  in  the  leasing 
department  of  the  real  estate  business  to  get  through 
his  head  is  to  so  far  restrain  his  enthusiasm  that  every 
representation  he  makes  to  a  tenant  is  a  fact  that  can 
be  verified.  Many  a  young  and  promising  broker  has 
lost  a  situation  and  embarrassed  his  employer  by  inform- 
ing the  tenant  in  an  offhand  way,  without  wrong  inten- 
tion, and  merely  through  over-zealousness  to  make  a 
commission,  that  "The  landlord  will  do  anything  you 
want  in  the  way  of  repairs,  alterations,  etc." 

Every  application  for  rent  should  be  taken  down  on 
a  sheet  supplied  for  that  purpose,  made  up  on  the 
following  lines: 


43 


Practical  Real  Estate  Methods 

APPLICATION  SHEET 
M  

(Full  name  of  individual  or  all  the  names  of  a  firm,  not  forgetting 
to  spell  out  first  names  in  full.  If  incorporated,  under  the  laws  of 
what  State  organized.) 


OF  

(Address) 


APPLIES   FOR 

(Description  of  premises) 


OCCUPATION    

(Describe  line  of  business) 


FOR    

(Period  of  lease) 


FROM  To 

(Beginning  of  lease)  (Expiration  of  lease) 

AT PAYABLE    

(Annual  rent)  (How) 


REFERENCE  : 

MR 

(Address) 
MR 

(Address) 
MR 

(Address) 


44 


Leasing 

On  References 

First  of  all  be  sure  to  secure  a  former  landlord  as 
a  reference,  for  here  you  obtain  the  best  information 
as  to  responsibility  and  respectability,  and  in  most  cases 
the  reference  is  not  prejudiced  by  the  fact  of  the  land- 
lord's being  a  personal  friend  of  the  prospective  lessee. 

There  are,  of  course,  cases  where  a  landlord's  reference 
cannot  be  relied  upon.  Where  the  landlord  and  tenant 
have  been  unable  to  agree,  an  unsatisfactory  reference 
may  be  received,  and  a  prospective  tenant  should  not 
be  refused  on  this  fact  until  you  are  thoroughly  con- 
vinced by  other  references  that  you  are  negotiating  with 
an  unsatisfactory  party.  Most  tenants,  particularly  in 
the  case  of  private  house  lessees,  will  refer  you  to  their 
clergyman,  doctor  or  lawyer.  As  a  rule,  these  references 
should  be  avoided,  and  the  name  of  some  bank  or  person 
with  whom  your  tenant  has  transacted  business  should 
be  required. 

As  a  special  warning!  If  your  tenant's  reference 
proves  unsatisfactory,  so  that  you  decline  his  applica- 
tion, above  all  things,  do  not  state  for  what  reason. 
Simply  say:  "Your  application  for  such  and  such  prop- 
erty is  declined."  Suits  for  defamation  of  character  have 
been  tried  on  the  statement  of  an  employee  that  an 
application  is  declined  because  the  prospective  tenant 
is  a  gambler  or  disreputable.  Don't  forget  you  might 
be  compelled  to  prove  it.  Beware  of  the  married  woman 
who  has  to  sign  a  lease  in  the  absence  of  her  husband, 
because  the  husband  is  a  traveling  man  and  cannot  be 
reached.  Have  the  landlord  approve  the  references  you 
have  looked  up,  or,  better  still,  if  possible,  get  him  to 
look  them  up  before  you  have  your  lease  executed. 

45 


Practical  Real  Estate  Methods 

Leave  nothing  out  of  your  lease  about  which  there  is 
a  chance  of  the  slightest  misunderstanding.  Make  a  list 
in  writing  of  any  repairs  or  alterations  that  may  be 
agreed  upon  and  have  the  same  signed  by  both  parties 
and  let  it  accompany  the  lease. 

Commission  versus  Salary 

In  many  large  brokerage  offices  the  younger  men  are 
left  to  their  own  resources.  Most  of  them  work  on  the 
commission  basis,  the  usual  arrangement  being  one-third 
of  the  total  commissions  received  to  the  clerk,  two-thirds 
to  the  firm  by  which  he  is  employed.  To  a  hustling  man 
the  greatest  opportunity  is  here  offered  and  his  earning 
capacity  is  greatly  increased  over  the  salary  basis.  An 
incentive  is  offered  on  this  basis  for  a  greater  effort, 
and  in  a  way  he  has  a  part  interest  in  the  business. 

Some  men  have  come  under  my  notice  who  have  been 
employed  on  a  commission  basis  who  have  earned  for 
themselves  in  a  year  as  high  as  $25,000.  The  average 
man,  I  would  say,  can  earn  from  $1,000  to  $5,000  on  a 
33  *~3  Per  cent  commission. 

If  you  secure  a  position  on  this  basis  with  a  reputable 
firm,  let  me  warn  you  not  to  be  carried  away  should  you 
be  fortunate  enough  by  consummating,  in  the  early  days, 
a  large  transaction.  Many  a  man  has  been  spoiled 
through  unusual  success  at  the  start;  he  imagines  that 
he  can  keep  up  this  record.  This  sometimes  happens — 
but,  when  luck  changes  and  it  is  not  his  good  fortune 
to  close  another  deal  within  a  month  or  so,  he  is  liable 
to  be  discouraged.  Many  months  may  follow  during 
which  he  may  be  unable  to  close  a  transaction.  Do  not 
give  up.  Keep  hammering  and  hammering  away,  and 


Leasing 

you  are  bound  to  win  out.  A  customer  or  lessee  may 
bob  up  months  after  you  have  called  and  tried  to  interest 
him  in  moving,  and  the  result  may  be  a  commission. 


Personality 

Personality  plays  a  very  important  part  in  your  suc- 
cess. Get  close  to  your  client,  whether  landlord  or 
tenant,  impress  him  with  your  integrity,  and  let  him 
understand  that  you  have  his  interests  at  heart  and  that 
by  making  his  transaction  through  you  he  is  assured  of 
the  best  possible  deal.  After  you  close  the  transaction, 
do  not  leave  your  customer  to  his  own  devices ;  call  upon 
him  and  see  that  he  is  satisfied;  see  that  the  repairs  he 
has  asked  for  are  done  for  him,  and  in  every  way  make 
him  a  satisfied  customer. 

The  best  possible  advertisement  is  the  recommenda- 
tion of  a  man  you  have  already  done  business  with  and 
satisfied.  I  have  often  found,  through  some  unknown 
reason,  that  I  was  unable  to  ingratiate  myself  with  a 
possible  tenant  at  the  first  two  or  three  meetings,  but  by 
continued  effort  and  by  offering  him  something  that 
has  not  been  thought  of  by  somebody  else,  I  have  been 
able  to  make  him  a  friend.  Though  I  may  not  have 
made  a  commission  on  the  particular  transaction,  I  have, 
at  least,  not  made  an  enemy,  and  the  chances  are  that 
my  efforts  may  result  in  a  transaction  with  some  friend 
of  this  very  man. 

Do  not  waste  too  much  time  on  people  where  you 
question  their  sincerity.  After  you  have  had  experience, 
you  will  be  able  to  choose  the  people  on  whom  you  must 
devote  the  greatest  amount  of  energy. 

47 


Practical  Real  Estate  Methods 

General  Realty  Knowledge  Valuable 

Keep  yourself  posted  in  every  department  of  the  real 
estate  business.  Do  not  think,  just  because  you  are 
leasing  property,  that  it  is  not  necessary  to  be  familiar 
with  what  property  is  selling  for  and  the  values  in  all 
neighborhoods.  It  sometimes  happens  that  when  you 
call  upon  a  man  to  interest  him  in  a  lease  he  will  ask 
you  if  you  have  anything  to  offer  either  in  the  way  of 
a  private  house  or  in  the  way  of  a  purchase.  You 
should  be  ready  to  answer  him  and  give  him  a  general 
idea  of  values  and  what  his  rent  would  cost  him  in  the 
event  of  his  purchasing  a  piece  of  property  for  occupancy, 
instead  of  leasing. 

Familiarize  yourself  with  the  best  locations  for  certain 
lines  of  trade.  When  you  have  a  business  property  in 
a  particular  location  that  is  desirable  for  a  certain  line 
of  business,  call  upon  everyone  in  this  line  of  business 
and  try  to  interest  him  in  the  property.  For  instance, 
we  will  say  you  interest  a  large  concern  in  the  piano 
business  in  a  piece  of  property  in  a  certain  location,  and 
close  a  lease  with  them ;  all  other  concerns  of  a  like  nature 
should  be  interviewed  immediately,  and  in  all  probability 
you  will  secure  another  customer  through  your  original 
lease. 

On  Starting  One's  Own  Business 

In  closing  let  me  say  that  if  you  are  in  a  good  situa- 
tion and  earning  a  fair  compensation,  and  with  a  growing 
concern,  do  not  be  too  ambitious  to  start  in  business 
for  yourself  with  an  idea  that  you  can  make  more 
money.  I  have  known  a  good  many  men  earning  from 
$5,000  to  $10,000  a  year  with  prominent  concerns  who 

48 


Leasing 

have  started  in  business  for  themselves.  Very  few  of 
them  succeed.  You  do  not  get  the  consideration  from 
operators,  speculators  and  investors,  when  you  present 
your  own  card,  that  you  do  as  a  representative  of  a 
long-established  and  reliable  real  estate  concern.  Be- 
sides, speculators  are  not  apt  to  give  you  the  same  con- 
sideration in  commissions  that  they  gave  in  your  old 
employment.  They  will  want  to  dicker,  want  you  to 
divide  or  pay  a  commission  to  some  one  of  their  friends, 
and  you  have  not  the  backing,  nor  the  capital,  to  permit 
of  your  refusal.  Your  financial  results,  therefore,  are 
liable  to  be  very  much  less  than  before  you  started  for 
yourself.  In  addition,  you  have  the  expense  of  main- 
taining an  office  and  at  least  an  office  boy  and  a  stenog- 
rapher, which  must  be  deducted  from  your  earnings. 

If,  however,  you 'are  able  to  secure  the  agency  for  a 
number  of  properties  that  will  pay  your  office  expenses 
and  give  you  a  slight  recompense  besides,  I  would  not 
wish  to  advise  you  not  to  start  for  yourself.  But  many 
men  give  up  a  fine  position  and  eventually  are  forced 
to  return  to  employment. 


49 


MANAGEMENT  OF  APARTMENT 
AND  TENEMENT  PROPERTY 

RANSOM  E.  WILCOX 

Real  Management  and  What  it  Implies — Im- 
portance of  Good  Construction — Impossible  to 
Make  Poor  House  a  Good  One — The  Owner  and 
His  Attitude — Agents  and  Tenants — Repairs 

CARE  of  tenement  property  is  an  important  and  very 
considerable  branch  of  the  business  in  this  crowded 
city.  The  high  price  of  land  has  made  necessary 
the  using  of  every  possible  portion  of  it,  and  the  mul- 
tiplication of  it  in  floors  one  above  the  other,  resulting, 
so  far  as  places  of  residence  are  concerned,  in  the  three- 
family  house,  the  single  flat,  the  double  flat,  the  triple 
flat,  the  "double-decker,"  the  apartment  house,  etc. — all 
of  which  are  tenement  houses.  A  great  majority  of  all 
the  people  living  in  Manhattan  must  ,be  dwellers  in 
iapartment  houses.  Any  real  estate  concern  on  this 
island,  except  perhaps  in  a  small  portion  of  its  southern 
end,  that  gives  much  attention  to  the  management  of 
property  will  presently  find  that  the  bulk  of  its  business 
in  that  line  is  the  care  of  tenement  houses  of  one  kind 
and  another. 

Is  not  almost  anybody  and  everybody  qualified  to  man- 
age tenement  property  without  study?  The  answer  de- 
pends on  our  understanding  of  what  is  involved  in  the 
word  "manage."  A  boy  may  ring  a  doorbell  and  ask 

50 


Apartment  and  Tenement  Property 

a  woman  for  her  rent,  and,  when  it  is  paid,  bring  it  to 
the  owner.  A  stupid  man  may  storm  his  way  through 
a  tenement  house,  denying  all  requests  for  attention  to 
necessary  matters  and  go  out  of  the  door  with  every 
tenant's  monthly  payment  in  his  pocket.  Are  these  there- 
fore qualified  real  estate  agents? 

We  have  many  such,  and  our  real  estate  seas  are 
strewn  with  wrecks  of  investments  that  under  better 
management  would  bring  their  owners  satisfactory 
increases  and  profits.  Many  tenement  houses  wisely 
planned  and  well  constructed  have  failed  as  investments 
because  they  have  never  had  a  chance.  They  have  borne 
too  heavy  a  load.  If  $200  net  is  the  right  earning  power 
of  a  house  and  you  insist  on  getting  $250,  you  may 
succeed  for  a  year  or  two,  but  only  at  the  cost  of  the 
property.  It  will  reckon  with  you  for  far  more  than 
you  have  gained.  If  a  property  well-designed  and  placed 
for  select  small  families  in  the  stress  of  some  poor  season 
is  offered  to  a  less  desirable  class  of  tenants,  you  will 
miss  achieving  the  best  the  house  can  do  and,  in  the 
end,  score  failure. 

Three  Elements 

There  are  at  least  three  elements  necessary  to  the  best 
success  in  the  management  of  property — good  houses, 
wise  owners,  skilful  agents.  Let  us  look  at  these  sep- 
arately and  in  this  order. 

A  man  about  to  purchase  for  investment  will  observe 
the  locality  with  great  care,  weigh  the  chances  for  per- 
manence and  increase,  give  some  attention  to  the  plan 
of  the  apartment  and  then  haggle  over  the  price,  having 
scarcely  thought  whether  the  material  and  workmanship 


Practical  Real  Estate  Methods 

are  such  as  will  tend  to  permanence  and  economy.  If 
the  house  appears  to  stand  up  straight  and  the  front 
door  and  hall  are  attractive,  he  thinks  it  is  a  good  build- 
ing. Even  loaning  concerns  who  take  first  mortgages 
on  tenements  are  negligent  upon  this  point.  Hundreds 
of  tenement  houses  are  put  upon  the  market  in  this 
city,  in  every  building  period,  which  are  constructed  so 
poorly  they  can  never  be  made  to  pay — so  much  of  the 
earnings  must  go  constantly  to  hold  the  building  together. 
At  intervals  must  come  expensive  overhaulings  and  re- 
enforcement. 

A  good  house  can  never  be  made  out  of  a  poor  one. 
Tenement  houses  are  artificial  and  complicated  struc- 
tures. At  their  very  best  it  costs  a  great  deal  of  money 
to  preserve  them.  Probably  not  one  per  cent  of  our 
tenement  houses  are  erected  by  the  parties  who  intend 
to  hold  them.  Much  of  our  ordinary  five  and  six  story 
tenement  construction  is  not  put  up  by  builders,  but  by 
speculators,  and  irresponsible  speculators  at  that.  They 
are  adepts  in  nothing  but  in  making  a  little  go  a  long 
way,  and  a  very  poor  thing  look  for  a  time  as  if  it 
were  good.  A  buyer's  eyes  are  so  dazzled  with  the 
mahogany  and  marble  of  the  vestibule  and  the  embossed 
plush  with  which  the  halls  are  hung,  that  he  cannot  see 
that  the  floors  of  the  house  are  out  of  level,  that  the 
doors  do  not  fit,  and  that  scanty  and  poor  labor  and 
material  are  everywhere  in  evidence.  There  is  such  a 
fine  polish  on  the  parlor  mantel  that  he  does  not  see  that 
the  balance  of  the  woodwork  has  not  received  a  particle 
of  sandpapering  since  it  left  the  mill,  and  very  likely  only 
one  coat  of  cheap  varnish.  A  skilful  agent  must  have 
a  discerning  eye  for  these  things.  When  a  client  seeks 
his  opinion  let  him  not  be  swerved  by  the  prospective 

52 


Apartment  and  Tenement  Property 

commission.     A  reputation  for  reliable  dealing  in  such 
matters  is  worth  money  in  the  trade. 

No  man  without  experience  should  purchase  a  piece 
of  improved  real  estate,  even  for  speculation,  without 
disinterested  professional  advice.  It  costs  but  ten  dollars 
to  get  an  appraisement  on  an  ordinary  tenement.  We 
ought  to  advise  our  clients  oftener  than  we  do  to  have 
prospective  purchases  appraised. 


Importance  of  Sound  Buildings 

If  buyers  of  real  estate  were  more  discriminating,  it 
would  not  be  possible  to  market  so  much  badly  built 
property.  The  speculative  craze  is  at  the  bottom  of 
much  of  the  trouble.  Ground  available  for  improvement 
is  so  high,  the  cost  of  material  and  labor  so  advanced, 
that  only  the  very  skilful  can  use  the  best  and  make 
a  profit.  The  ordinary  speculative  builder,  paying  a  high 
price  for  his  ground  and  an  unreasonable  bonus  for  his 
building  loan,  must  recoup  by  scanting  the  weight  and 
quality  of  his  material,  pinching'  his  contractors  to  a 
figure  where  it  will  be  impossible  for  them  to  do  an 
honest  job,  glossing  over  imperfections  with  eye-catching 
tricks,  and  trusting  to  the  glib  mouth  of  the  salesman. 
New  York  is  a  large  place,  most  men  make  but  few 
investments  in  a  lifetime,  and  by  the  time  a  man  has 
learned  wisdom  in  these  things  he  is  either  old  enough 
to  die,  or  too  poor  to  try  another  venture.  Let  us 
try  to  educate  our  clients  to  know  the  difference  between 
the  good  and  the  poor.  Let  it  be  known  in  the  trade 
that  we  are  not  interested  in  worthless  property,  and 
that  it  cannot  be  sold  to  them  whom  we  advise. 

There  is  fine  productive  tenement  property  built  and 

53 


Practical  Real  Estate  Methods 

sold  every  year.  Some  of  it  goes  into  the  hands  of 
parties  who  will  not  manage  it  themselves  and  who 
will  retain  it  for  permanent  investment.  Such  property 
is  worth  seeking.  The  more  you  get  of  it  the  more 
you  can  get.  If  you  push  your  efforts  wisely  and  per- 
sistently your  office  will  presently  have  a  reputation  as 
a  place  where  good  things  can  be  had,  and  this  will  be 
of  value  to  you  not  only  in  getting  property  to  manage, 
but  in  keeping  it  well  tenanted  afterward.  Pay  par- 
ticular attention  to  property  that  is  held  for  permanent 
investment.  There  may  be  some  glory  but  there  is  little 
profit  in  filling  up  a  block  of  new  tenements  only  to 
have  it  sold  away  from  you  as  soon  as  it  is  on  a  paying 
basis.  As  between  an  occasional  chance  at  a  speculator 
and  an  opportunity  to  serve  a  permanent  investor,  pay 
court  to  the  latter  always. 

The  Wise  Owner 

The  second  essential  to  success  in  the  management 
of  property  is  the  wise  owner.  Let  it  be  remembered 
first  of  all  that  the  agent  is  the  instrument  for  the 
accomplishment  of  the  owner's  will.  It  is  the  owner's 
right  to  pursue  with  his  property  what  course  he  pleases. 
He  may  desire  it  to  be  managed  on  liberal  lines,  giving 
good  tenants  practically  whatever  they  want  in  the  nature 
of  repairs,  keeping  the  property  in  the  best  of  condition, 
installing  new  and  up-to-date  appointments  as  fast  as 
they  are  discovered  and  approved.  Many  owners  make 
money  by  this  method. 

Other  owners  will  pursue  quite  an  opposite  course. 
They  conceive  that  every  dollar  spent  upon  the  property 
is  so  much  withdrawn  from  their  legitimate  income.  To 
them  the  tenant  who  wants  repairs  is  a  destructive  enemy. 

54 


Apartment  and  Tenement  Property 

They  will  sometimes  insist  that  nothing  whatever  be 
expended  during  long  periods.  Such  men  usually  exact 
the  highest  rent  possible  to  obtain,  often  overreaching 
and  injuring  their  own  interests  by  these  methods. 

Whatever  attitude  the  owner  takes  upon  these  and 
kindred  questions,  it  is  the  agent's  business  to  stand  with 
him  and,  if  he  can,  execute  his  will.  Let  him  fairly  and 
plainly  show  the  owner  the  consequences  of  an  unwise 
course,  exhibit  the  success  of  those  who  follow  different 
methods,  and  thus  bring  him  if  possible  to  a  saner  and 
more  healthful  view,  but  let  him  go  no  further  than 
he  can  carry  the  owner  with  him.  The  groundwork  of 
a  successful  relation  between  principal  and  agent  is  con- 
fidence on  the  part  of  the  principal  and  loyalty  on  the 
part  of  the  agent. 

Agents  should  observe  each  individual  owner  with 
care,  and  patiently  develop  his  thought  toward  himself 
and  the  enterprises  in  which  they  are  mutually  inter- 
ested. Teach  the  overindulgent  and  too  liberal  owner 
to  curb  his  natural  propensity  and  to  hold  what  he  has 
with  a  tighter  fist.  Teach  if  you  can  the  one  who  goes 
to  the  opposite  extreme  that  he  but  robs  himself.  Teach 
the  owner  who  regards  his  tenants  as  his  natural  enemies 
that  his  interests  and  theirs  run  in  parallel  lines.  When 
you  have  shown  an  owner  that  he  can  trust  you,  insist 
on  his  pursuing  such  a  course  as  does  not  discredit  you 
with  the  tenants  and  the  men  employed  about  the  prop- 
erty. Let  his  orders  be  given  through  you.  The  wise 
owner  will  magnify  the  importance  of  his  agent.  When 
he  finds  himself  desiring  not  to  do  so,  he  had  better 
discharge  him.  Contrariwise,  the  agent,  if  he  presently 
finds  that  he  cannot  do  so  and  maintain  his  self-respect, 
will  resign. 

55 


Practical  Real  Estate  Methods 

The  Successful  Agent 

Let  us  come  now  to  the  third  essential  to  success  in 
tenement  house  management — the  skilful  agent.  Let  the 
skilful  agent  respect  his  vocation  as  manager  of  property 
and  believe  that  it  has  excellent  possibilities.  It  provides 
a  steady  income  and  supports  an  office  force  and  equip- 
ment for  an  all-round  business.  Booms  may  wax  and 
wane,  dull  periods  may  continue  long,  the  agent  who 
has  a  good  line  of  property  has  little  occasion  to  worry. 
Industrial  depressions  may  come  when  rentals  depreciate 
and  incomes  shrink,  but  he  need  not  fear.  They  will 
even  work  to  his  advantage,  for  then  owners  who  in 
better  times  could  manage  their  own  property  will  want 
his  professional  skill  and  assistance.  It  is  a  good  prep- 
aration for  any  special  line  of  real  estate  work  that  one 
may  desire  later  to  follow.  Men  with  enviable  reputa- 
tions have  laid  the  foundations  of  their  fortunes  in  the 
care  and  management  of  property,  much  of  it  of  the 
tenement  kind.  An  agent  who  has  managed  a  varied  line 
of  property  in  any  locality  should  know  the  needs  and 
possibilities  of  that  section  along  real  estate  lines  better 
than  anyone  else.  A  very  profitable  class  of  real  estate 
work  is  the  appraising  of  property.  A  great  volume  of 
it  is  carried  on  constantly.  The  city  is  all  the  while 
taking  property  for  public  uses.  Estates  have  to  be 
appraised  for  the  collateral  inheritance  tax.  Large  prop- 
erties are  often  involved  in  litigation.  Men  that  can 
value  them  correctly  and  maintain  their  values  under 
severe  cross-questioning  are  sought  and  well  paid.  Then 
there  is  a  mass  of  appraising  for  loans  and  purchases. 
There  is  no  better  preparation  for  an  appraiser  than 
to  have  managed  a  variety  of  property.  To  be  able  to 

56 


Apartment  and  Tenement  Property 

discern  the  earning  power  of  property  is  to  unlock  the 
very  secrets  of  its  value,  for,  in  the  last  analysis,  prop- 
erty is  valuable  in  proportion  to  what  it  will  earn. 

Again,  the  manager  of  property  becomes  familiar  with 
much  connected  with  the  building  business.  A  volume 
of  repairs  is  passing  under  his  supervision  all  the  time. 
Sometimes  expensive  overhauling  will  be  done  under 
his  direction.  Rebuilding  after  fires  will  have  to  be 
supervised.  All  this  work  enlarges  his  knowledge  of 
real  estate. 

The  acquaintance  one  makes  managing  property,  if 
one  has  a  good  measure  of  success,  is  a  valuable  asset. 
Any  office  with  a  successful  period  of  managing  prop- 
erty behind  it  comes  to  have  clients  who  will  not  purchase 
nor  sell  except  upon  its  advice.  If  this  relation  is  skil- 
fully maintained,  such  an  office  comes  to  have  an  ad- 
vantage over  all  others  in  marketing,  in  good  times,  the 
properties  it  has  put  upon  its  books.  There  can  be  no 
doubt  that  the  managing  of  investment  property  is  the 
best  preparation  and  foundation  for  a  broad  and  success- 
ful real  estate  business. 


Importance  of  Detail 

The  only  way  to  know  the  whole  business  is  to  begin 
at  the  bottom.  There  is  a  mass  of  trying  details  con- 
nected with  the  faithful  care  of  tenement  property.  You 
cannot  at  first  put  this  off  on  others.  You  will  some- 
times make  a  hundred  dollars  with  very  little  effort, 
and  the  next  day  you  will  have  to  vex  and  weary  your- 
self over  the  expenditure  for  some  client — of  $5  or  per- 
haps 5  cents.  Your  eventual  success  will  depend  not  a 
little  on  your  being  able  to  attend  skilfully  to  a  great 

57 


Practical  Real  Estate  Methods 

number  of  uninteresting  details,  each  a  trifle  in  itself, 
but  any  one  of  which  going  wrong  may  be  the  cause 
of  serious  dissatisfaction.  It  may  seem  a  trifling  thing 
for  you  to  go  into  the  prices  of  small  supplies  and  the 
cost  of  small  repairs,  but  you  must  know  these  things 
and  be  constant  master  of  the  means  and  method  by 
which  they  are  attended  to  in  your  properties.  In  man- 
aging tenement  houses,  eternal  vigilance  alone  will  secure 
immunity  from  a  host  of  errors,  pitfalls,  and  losses  that 
will  otherwise  be  your  undoing. 

In  respect  to  necessary  expense  connected  with  your 
properties,  I  can  give  one  direction  that  will  be  worth 
all  others  combined.  Consult  freely  with  the  owner. 
This  is  the  owner's  right;  it  is  also  your  safety.  It  is 
especially  necessary  with  regard  to  expenses.  When  you 
expend  what  is  necessary  to  keep  his  property  in  con- 
dition and  set  it  all  down  for  his  perusal,  rendering  a 
voucher  for  every  item,  little  or  large,  as  you  of  course 
will,  the  chances  are  that  you  will  surprise  and  dis- 
appoint him.  If  it  is  his  first  experience  he  may  sacrifice 
you  after  a  year  or  two  in  an  experiment  to  see  if  it 
cannot  be  done  for  less  money.  Therefore  divide  re- 
sponsibility with  him  at  every  step  if  he  will  permit 
you.  Most  men  want  to  be  consulted,  especially  until 
they  find  that  their  agent  is  entirely  safe.  Before 
agreeing  to  do  some  needed  repair  or  renewing  or 
improving  some  appointment  of  the  property  get  his 
views  and  consent;  show  him  as  nearly  as  possible 
to  what  it  will  lead.  See  if  he  has  not  some  man  whom 
he  would  like  you  to  employ,  or  who  will  give  you  an 
estimate.  He  will  presently  find,  probably,  that  men 
will  bid  lower  for  you  than  they  will  for  him.  The 
volume  of  your  work  makes  you  a  desirable  customer. 

58 


Apartment  and  Tenement  Property 

Study  the  needs  of  your  houses  and  get  a  long  view 
of  them.  You  may  see  some  way  to  improve  them.  Talk 
with  the  owner  about  these  and  make  use  of  his  sug- 
gestions. Something  has  been  said  about  the  tiresome 
and  exacting  detail  of  this  business.  These  conferences 
with  the  owner  will  brace  you  up  and  prevent  your  tiring 
of  and  neglecting  these  matters  that  seem  trifling,  but 
that  in  the  aggregate  mean  so  much  for  the  success  of 
your  undertaking.  These  conferences  will  not  always 
be  pleasant.  Sometimes  an  owner  has  cause  for  dis- 
couragement and  possibly  distrust.  Let  there  be  no 
situation  or  transaction  that  you  are  not  ready  to  face. 
Have  no  matters  that  must  be  concealed.  It  will  be  hard 
enough  to  satisfy  him  when  things  are  right,  without 
following  questionable  courses.  I  have  used  the  mas- 
culine gender  here  in  speaking  of  owners.  Some  of 
your  most  difficult  cases  will  be  with  the  ladies.  Some 
of  them  will  place  full  confidence  in  you.  Some  are 
nervous,  some  naturally  suspicious,  some  ignorant;  and 
this  applies  to  the  men  as  well  as  to  the  women.  How- 
ever, most  of  the  owners  whom  you  try  to  serve  faith- 
fully will  be  your  friends. 

Tenant  and  Agent 

The  relation  between  a  right-minded  agent  and  his 
tenants  should  be  pleasant.  When  any  considerable  num- 
ber of  the  latter  are  saying  harsh  and  discreditable  things, 
there  is  something  wrong.  An  agent  condemned  by  any 
large  proportion  of  his  tenants  is  not  in  a  position  to 
serve  his  principal  to  the  best  advantage.  Some  have 
conceived  that  the  interests  of  the  owner  and  the  tenants 
are  opposed  to  each  other  and  that  the  only  way  to  be 

59 


Practical  Real  Estate  Methods 

loyal  to  the  one  is  to  antagonize  the  other.  Other  agents 
fully  intend  to  be  just  and  considerate,  but  permit  them- 
selves, under  the  stress  of  business,  to  forget  and  to 
neglect  that  which  they  fully  intended  should  be  done. 
The  agent  occupies  a  difficult  position  between  the  owner 
and  his  tenant.  In  times  when  renting  is  bad  landlords 
bid  high  for  good  tenants,  and  thus  inculcate  in 
them  the  notion  that  they  must  have  many  indulgences 
and  much  attention.  Thus,  to  deal  fairly  between  the 
landlords,  both  the  greedy  and  the  reasonable,  on  the 
one  side,  and  the  tenants,  both  the  wasteful  and  the 
worthy,  on  the  other  side,  is  no  easy  matter.  You  will 
find  it  of  great  advantage  to  look  differences  and  obstacles 
squarely  in  the  face,  and  if  you  can  decide  promptly 
what  should  be  done,  and  live  up  to  it,  much  trouble 
will  be  avoided.  To  pursue  a  waiting  policy  is  ordinarily 
worse  than  useless.  A  prompt  "No"  with  a  fair  state- 
ment of  the  reason  is  infinitely  better  than  a  hope  en- 
couraged only  to  be  finally  denied.  Your  time  and 
thought  are  too  valuable  to  yourself  to  use  them  over 
and  over  on  the  same  small  matters,  and  your  tenants 
will  soon  discover  in  you  and  greatly  appreciate  a 
business-like  treatment  of  every  question. 

A  very  important  part  of  the  work  of  the  agent  is 
the  collection  of  the  rent.  If  you  have  to  do  the  col- 
lecting yourself  for  a  few  months  or  years,  it  will  be 
an  experience  that  will  be  valuable  to  you  ever  after- 
wards in  the  management  of  property.  A  skilful  col- 
lector can  make  a  good  payer  out  of  a  poor  one,  and 
a  neglectful  and  foolish  collector  can  bring  forth  a  new 
brood  of  bad  payers  in  a  very  short  time.  Not  all 
tenants  can  pay  on  the  first  of  the  month.  If  you  have 
many,  you  cannot  reach  all  on  the  first  of  the  month. 

60 


Apartment  and  Tenement  Property 

You  should  reach  all  within  a  very  few  days  of  that 
time.  After  that,  it  is  chiefly  a  matter  of  knowledge 
when  the  tenant  can  pay,  of  her  knowing  when  to  expect 
you,  and  of  your  always  being  there  at  the  appointed 
time.  Let  poor  payers  know  long  beforehand  what  they 
are  expected  to  do,  and  your  way  will  be  easier  and 
your  success  surer. 

Teach  your  employees  to  be  what  you  want  to  be 
yourself,  and  to  follow  your  methods  and  ideals.  Your 
janitors,  cleaners,  engineers,  hall  boys,  elevator  runners 
and  clerks,  all  ought  to  work  for  your  success.  If  they 
are  wisely  selected,  treated  with  respect,  rightly  super- 
vised and  encouraged,  they  will  presently  like  you  and 
work  for  you.  Since  so  much  of  what  is  to  be  done 
depends  upon  them,  let  them  feel  their  responsibility. 
Help  them  to  magnify  their  positions  if  they  are  worthy 
to  hold  them,  and  repress  those  that  are  too  officious. 
The  janitor  is  a  very  important  matter  in  a  tenement 
house.  The  tenants  should  like  him  and  use  him  well. 
The  janitor  joke,  like  the  mother-in-law  joke,  is  badly 
overworked.  It  is  possible  to  get  painstaking  men  and 
women  in  these  positions.  In  a  cheap  tenement,  where 
the  rents  are,  say,  $10  to  $15,  your  janitor  will  sometimes 
be  the  best  man  or  woman  in  the  house,  economically 
and  socially.  It  is  a  good  thing  if  it  is  so.  If  he  has 
some  executive  ability,  it  will  be  of  value  to  you.  He 
ought  to  have  some  mechanical  sense,  and  be  handy  at 
repairs.  If  you  can  get  work  done  by  employees  paid 
by  the  month,  and  thus  save  mechanics'  day  wages,  it 
will  be  of  considerable  advantage  to  the  property. 

Enough  has  been  said  to  make  it  plain  that  the  business 
of  managing  tenement  property  will  bear  some  study, 
and  that  it  is  worth  undertaking  for  its  rewards  and 

61 


Practical  Real  Estate  Methods 

emoluments.  Do  not  let  the  small  cares  and  burdens 
of  your  business,  no  matter  how  successful  it  is,  consume 
all  your  time  and  strength.  Save  some  portion  of  your 
office  hours  for  attention  to  larger  things  than  these  that 
press  immediately  upon  you.  The  agent  can  be  a  slave 
to  the  petty  exactions  of  his  duties  with  no  wider  horizon 
than  the  farmer  who  only  plods.  Take  time  to  see  what 
is  going  on  about  you,  what  others  are  doing,  what  new 
thing  you  may  try  for.  Catch  the  movements  of  trade 
and  improvement  in  the  whole  town,  and  in  other  towns, 
try  to  discern  their  causes  and  find  some  place  in  them 
for  a  new  effort  of  your  own.  Take  the  Record  and 
Guide  and  read  not  only  its  gossip  but  its  discussions; 
meet  with  other  men  in  the  trade,  and  find  out  what 
they  are  thinking  about,  and  what  your  own  opinions 
are  on  these  matters.  In  these  things  there  is  for  you 
business  enlargement  and  growth,  and  also  increase  in 
all  those  qualities  and  acquisitions  that  challenge  the 
esteem  of  men. 


62 


MANAGEMENT  OF   LOFT 
PROPERTY 

EDWIN  H.  HESS 

Collecting  Ability  Not  Everything — Extensive  Spe- 
cial Knowledge  Required — Familiarity  with  Neigh- 
borhood— Repairs — Danger  of  Quibbling — Insurance 
—Selling  and  Appraising— Getting  and  Keeping  Ten- 
ants 

IN  the  management  of  business  buildings — commonly 
known  as  loft  properties — the  up-to-date  broker  has 
need  for  highly  specialized  knowledge  in  many  fields. 
The  mere  ability  to  collect  rents  is  not  enough.  For 
in  the  last  twenty-five  years  the  nature  of  loft  property 
has  so  changed  that  the  manager  of  to-day,  in  addition  to 
being  thoroughly  posted  on  general  real  estate  conditions, 
must  have  no  little  knowledge  in  mechanical  and  technical 
fields.  A  quarter  of  a  century  ago  there  was  less  com- 
petition, and  tenants  sought  the  agent.  To-day  there 
is  the  keenest  competition  in  this  field,  and  the  agent 
must  seek  the  tenant  and  be  able  to  show  that  his  build- 
ing, in  arrangement,  appliances,  service,  light  and  air, 
is  peculiarly  adapted  to  that  tenant's  special  line  of 
business.  Where  stairs,  coal  stoves  and  the  cheapest 
form  of  lavatory  were  satisfactory  a  few  years  ago, 
tenants  to-day  demand  high-power  elevators,  steam  heat, 
elaborate  plumbing  and  service. 

63 


Practical  Real  Estate  Methods 

The  property  manager  of  to-day  must  be  able  to  advise 
his  clients  in  their  buying  and  selling  and  moreover,  if 
there  is  a  proposal  to  erect  a  loft  building,  must  be  able 
to  tell  his  client  how  to  arrange  that  building  at  once 
to  attract  the  class  of  tenants  normal  to  that  neighbor- 
hood, and  also  yield  a  fair  return.  Lastly,  he  must  be 
able  to  keep  his  buildings  in  proper  repair  and  see  that 
they  are  operated  from  the  point  of  view  of  the  tenant, 
as  well  as  with  due  consideration  of  the  owner's  bank 
account. 

Knowledge  of  District 

To  carry  out  these  several  different  branches,  it  is 
of  prime  importance  that  the  broker  know  his  territory 
like  a  book.  He  must  be  an  expert  on  values,  both 
absolute  and  based  on  rentals.  He  naturally  must  be 
thoroughly  familiar  with  prevailing  rents;  must  know, 
at  first  hand,  not  a  little  about  practical  construction  and 
repairs.  Knowledge  of  mortgaging  and  financing  also 
is  important.  He  must  be  able  to  advise  on  matters 
of  insurance — fire,  liability,  elevator,  rental,  plate-glass 
insurance.  And,  of  course,  he  must  be  able  to  rent — 
to  find  tenants,  to  keep  track  for  years  of  prospective 
occupants — and  to  hold  tenants  when  he  has  good  ones. 
This  all  implies  tact  and  sound  judgment,  absolute  sys- 
tem and  the  willingness  to  keep  everlastingly  at  it.  For 
owners — particularly  those  who  inherit  the  property — 
rarely  have  the  necessary  unbiased  point  of  view  to  man- 
age their  own  buildings  successfully. 

Special  Trades 

The  broker,  for  example,  is  often  asked  to  advise  on 
certain  loft  improvements.  The  architect,  if  left  to  him- 

64 


Management  of  Loft  Property 

self,  would  probably  put  up  a  handsome,  safe  building, 
and  yet  this  loft  structure,  which  might  be  ideal  for  a 
neighborhood  a  few  blocks  to  the  north,  might  have 
certain  defects  of  arrangement  which  would  greatly 
lessen  its  value  for  the  special  forms  of  business  cen- 
tering about  its  site.  For,  nowadays,  certain  neighbor- 
hoods are  practically  monopolized  by  certain  lines  of 
trade,  and  tenants  must  be  recruited  from  those  special 
forms  of  manufacturing  and  importing.  A  business 
building  not  suited  to  the  trade  of  its  district,  therefore, 
might  prove  to  be  a  white  elephant  until  at  some  future- 
time  the  character  of  the  neighborhood  changed.  Sim- 
ilarly, the  architect  might  plan  fittings  and  decorations 
which  would  not  hold  up  well  for  that  class  of  occupant, 
although  just  the  thing  for  an  office  building  where 
little  freight  is  handled.  Again,  light  and  air  might 
not  be  accurately  adapted  for  neighborhood  trade.  Qr 
the  elevators  might  be  of  too  expensive  a  pattern,  or 
the  heating  apparatus  such  as  to  involve  enormous  coal 
bills.  It  follows,  then,  that  the  real  manager  must  know 
the  character  of  the  neighborhood,  and,  as  there  are 
frequent  migrations,  be  able  to  foresee  either  the  coming 
of  a  better  or  a  poorer  class  of  tenants.  In  addition, 
he  must  know  how  the  neighborhood  business  is  run, 
at  least  as  far  as  its  requirements  of  floor  space  and 
arrangement  are  concerned.  He  must  know  what  eleva- 
tors are  necessary  and  how  to  lay  out  a  building  which 
under  the  expected  occupancy  will  be  economical  to  clean, 
operate  and  keep  up. 

Here  are  some  of  the  things  that  the  broker  must 
know  about  neighborhood  trades: 

I.  Certain  businesses  do  not  mix  well  in  one  building. 
For  example,  importers  and  cloak  manufacturers  do  not 

65 


Practical  Real  Estate  Methods 

like  to  be  in  the  same  building.  The  importers,  because 
of  their  bigger  profits  and  the  class  of  goods  they  handle, 
commonly  are  able  to  pay  higher  rents.  Their  help 
is  of  a  different  class;  the  people  who  come  to  their 
warerooms  are  different.  Consequently,  they  do  not  like 
to  be  in  the  same  building  with  certain  classes  of  man- 
ufacturers who  hire  cheap  help  which  hang  around  the 
halls  and  sidewalk  and  crowd  the  elevators  at  certain 
hours. 

2.  Different  businesses  require  different  light  arrange- 
ment.    For  example,  windows  and  exposure  that  would 
be  ideal  for  a  hat  room  would  not  do  at  all  for  a  dealer 
in  precious  stones. 

3.  Different  businesses  require  different  elevator  serv- 
ice.    Some  have  their  rush  hours  in  the  early  morning, 
at  noon  and  at  different  closing  hours. 

4.  Some   regard   mail   chutes   and  fine   sanitary   con- 
veniences as  absolutely  essential.     Others  do  not  care 
so  much  about  these  points. 

5.  Each  business   has   its  own  system  of   furnishing 
and   equipping   its   offices   and   workrooms.      Naturally, 
the  man  who  wants  to  use  show  cases  needs  a  different 
sort  of  loft  from  the  one  who  wishes  to  operate  scores 
of  power  sewing  machines. 

In  these  connections,  the  number  and  character  of 
elevators,  the  location  of  stairways,  position  of  columns, 
height  of  ceilings,  have  an  important  bearing. 

6.  Some  trades  need  heavy  machinery,  others  do  not; 
certain  trades  are  hazardous  from  the  fire  risk,  others 
are  comparatively  safe. 

These  eccentricities  of  the  several  trades  or  lines  of 
business  which  form  the  normal  renting  constituency 
of  a  district  all  must  be  most  carefully  considered.  For 

66 


Management  of  Loft  Property 

on  the  building's  adaptability  to  them  depends  its  success 
and  the  nature  of  its  rentals.  When  there  is  evidence 
that  a  special  trade  is  migrating  to  a  new  district,  the 
broker  must  keep  his  ear  to  the  ground  to  learn  what 
is  to  succeed  it,  and,  if  possible,  get  the  cream  of  the 
new  tenants. 

Repairs 

While  the  usual  lease  requires  the  tenant  to  make 
certain  repairs  and  leaves  others  to  the  owner,  it  is  not 
always  the  best  of  policy  to  hold  strictly  to  the  letter 
of  the  lease.  This  is  particularly  the  case  when  failure 
to  repair  a  defect  may  cause  extensive  damage  either  to 
another  tenant  or  to  the  building  itself.  In  a  certain 
building  there  was  a  leak  in  one  of  the  flush  tanks, 
caused  by  the  act  of  the  tenant.  The  tenant  was  notified 
to  fix  it.  He  refused.  The  owner  would  not  do  any- 
thing, because  the  lease  placed  responsibility  on  the 
tenant.  In  a  very  short  time  the  water  had  taken  a  strip 
of  plaster  25x50  feet  off  the  wall  and  had  ruined  a  large 
quantity  of  merchandise  belonging  to  the  tenant  below. 
A  lawsuit  followed,  which  was  decided  against  the 
owner.  If  he  had  fixed  the  leak  after  the  tenant's  re- 
fusal, he  would  have  had  a  case  against  the  lessee  for 
the  cost  of  the  repairs.  Therefore,  after  a  tenant's  re- 
fusal to  fix  anything,  whether  it  is  in  the  lease  or  not, 
it  is  up  to  the  owner  to  fix  it.  Then  the  owner  can 
endeavor  to  recover  from  the  tenant. 

Plumbing  must  never  be  left  unrepaired. 

Boilers  out  of  condition  are  dangerous  to  the  building 
and  its  tenants. 

Elevator  machinery  also  should  never  be  neglected. 
A  car  might  run  on  for  several  weeks  with  a  frayed 


Practical  Real  Estate  Methods 

cable  or  some  other  faulty  condition.  Then  again  it 
might  carry  half  a  dozen  people  to  death,  through  the 
negligence  of  those  in  charge  of  the  building,  and  the 
liability,  both  moral  and  monetary,  would  be  tremendous. 
In  connection  with  elevator  repairs  in  a  busy  building, 
it  is  frequently  wise  policy  to  have  the  changes  made 
at  night,  even  if  the  charge  for  night  labor  is  higher. 
Few  things  irritate  a  tenant  more  than  to  have  his 
business  crippled  for  a  day  because  the  owner  has  al- 
lowed the  elevator  repairs,  that  could  have  been  made 
at  night,  to  go  over  until  business  hours,. 

In  the  case  of  all  repairs,  it  is  most  important  that 
the  agent  himself  look  after  the  property,  inspect  it 
personally  every  once  in  a  while,  and  keep  a  definite 
picture  of  its  condition  in  his  mind.  He  should  also 
have  actual  general  knowledge,  if  not  technical  knowl- 
edge, of  what  repairs  will  cost,  and  be  able  to  judge 
their  real  importance  to  the  property.  Good  mechanics 
should  be  employed  and  proper  materials  used.  Even 
if  there  be  a  competent  superintendent,  the  agent  should 
himself  have  a  look  at  important  repairs,  and  not  rely 
wholly  on  reports  of  others.  Naturally  there  should 
be  the  strictest  economy,  but  where  saving  in  this  direc- 
tion affects  the  building  detrimentally,  saving  on  repairs 
is  really  future  extravagance.  The  agent,  because  he 
visits  the  property  and  knows  the  tenants,  is  generally 
a  safer  arbiter  than  the  distant  owner. 

In  case  of  petty  repairs,  it  is  sometimes  good  policy 
to  make  repairs  whether  the  terms  of  the  lease  require 
you  to  do  so  or  not.  It  pleases  the  tenant,  because  it 
saves  him  the  time  and  trouble  of  hunting  up  a  mechanic. 

The  practice  of  an  agent's  accepting  a  commission 
from  contractors  cannot  be  too  strongly  condemned.  A 

68 


Management  of  Loft  Property 

study  of  such  bills  will  generally  reveal  the  fact  that 
the  owner  paid  a  fair  price  for  the  job  plus  the  agent's 
commission  from  the  contractor.  It  is  far  better  for 
the  agent  to  refuse  the  management  of  a  building  than 
to  make  a  bid  so  low  that  he  is  forced  to  take  a  rake- 
off  on  repairs.  Frequently  agents,  in  competing  to  get 
a  building,  name  too  •  low  a  commission  with  the  full 
expectation  of  making  up  on  contractor's  bills. 


Insurance 

The  fire  insurance  rate  which  an  owner  is  compelled 
to  pay  often  can  be  reduced  by  certain  inexpensive  im- 
provements or  greatly  lowered  by  proper  structural  ar- 
rangement when  the  building  is  planned.  It,  therefore, 
behooves  the  broker  either  to  know  these  points  himself 
or  to  employ  an  insurance  man  who  knows  them.  Com- 
paratively few  people  know  that  a  loft  which  is  very 
dusty  and  dirty,  or  which  shows  broken  plaster  may 
cause  the  insurance  people  to  charge  a  higher  rate.  The 
installation  of  fire  buckets  or  extinguishers  may  save 
the  owner  more  in  insurance  in  a  single  year  than  their 
total  cost.  In  some  cases,  the  providing  of  an  extensive 
automatic  sprinkler  system  may  so  lower  a  rate  as  to 
pay  for  itself  very  quickly.  The  fire  record  of  a  tenant 
is  also  an  important  factor.  If  a  tenant  whose  fire 
record  is  bad  is  accepted  it  may  raise  the  rate  for  the 
entire  building  and  for  all  the  other  tenants.  The  broker 
should  know  about  various  forms  of  liability  insurance 
and  should  not  overlook  the  importance  of  rental  in- 
surance, which,  after  a  fire,  reimburses  the  owner  for 
loss  of  rents  while  the  building  is  being  put  back  into 
shape. 

69 


Practical  Real  Estate  Methods 

Selling  and  Appraising 

Selling,  appraising,  handling  mortgages  have  all  be- 
come functions  of  the  modern  loft-building  agent.  His 
clients  frequently  call  upon  him  to  handle  their  end  of 
deals.  If  he  is  wise  he  will  refuse  to  give  advice  on 
values  in  territories  with  which  he  is  not  thoroughly 
familiar.  To  advise  in  such  matters  in  his  own  territory, 
the  agent  must  keep  track  of  all  important  sales,  know 
the  earning  power  of  improved  property  and  keep  at 
hand  full  information  about  available  land  and  other 
investments.  In  mortgage  matters,  he  must  know  the 
prevailing  rates,  and  where  to  apply  for  mortgages,  and 
have  a  list  of  institutions  and  individuals  willing  to  lend 
money  on  certain  classes  of  property.  Naturally,  he 
must  know  whether  the  amount  sought  or  asked  for  as 
a  mortgage  loan  is  reasonable  or  excessive. 

Finding  Tenants 

Tenants  no  longer  come  to  the  agent  and  rent  the 
property.  He  must  go  out  for  them  and  rent  to  them 
in  the  face  of  sharp  competition.  He  must  have  records 
of  expiring  leases  in  other  properties  and  see  if  he  can 
induce  tenants  to  move  to  his  building.  This  involves 
canvassing  hundreds  of  concerns.  Work  with  a  pro- 
spective tenant  should  begin  at  least  six  months  before 
his  lease  expires.  But  in  the  rush  to  get  tenants,  the 
agent  must  not  be  short-sighted  and  take  a  tenant  whose 
presence  will  make  other  tenants  less  satisfied  or  give 
the  building  a  character  which  may  affect  its .  total 
rentals. 

70 


Management  of  Loft  Property 

Keeping  Tenants 

Handling  tenants  requires  great  tact  and  sound  judg- 
ment. Make  your  tenants  your  friends,  safeguard  their 
rights,  don't  draw  too  close  a  line  in  the  matter  of 
repairs.  Distinguish  between  sluggish  payers  and  hab- 
itually careless  tenants.  Handle  dispossess  proceedings 
with  care.  Sometimes  tenants  simply  try  to  be  dispos- 
sessed in  order  to  get  out  of  a  building.  In  some  cases 
it  is  wise  to  let  the  rent  run  over  if  a  good  tenant  is 
temporarily  out  of  cash  and  has  prospects  of  coming 
around  all  right.  If  he  has  no  money  and  no  prospects, 
dispossess  him.  But  if  it  can  be  avoided,  do  not  dis- 
possess a  tenant  until  the  renting  season  for  the  locality. 
If  the  tenant  is  honorable  he  will  probably  pay  his  rent 
eventually,  and  the  majority  of  tenants  want  to  be 
honorable. 

In  all  of  these  matters  remember  that  an  owner  who 
has  suddenly  inherited  a  property  knows  little  about 
handling  it.  If  not  wisely  guided,  he  is  almost  certain 
to  make  trouble  with  tenants  or  to  be  too  lenient  with 
them.  The  ideal  owner  is  the  man  who  has  bought  his 
property  with  hard-earned  money.  He  has  a  broader 
knowledge  of  ^business  men  and  business  conditions. 


MANAGEMENT  OF  DOWN-TOWN 
OFFICE  BUILDINGS 

JOEL  S.  DeSELDING 

New  Buildings — Manager's  Relations  with  Owner  and 
Architect  —  Value  of  Ornamentation  —  Advertising 
Quality  of  Great  Structures — Neighborhood  Influ- 
ences— Getting  and  Keeping  Tenants — Treatment  of 
Public 

MANAGEMENT  of  an  office  building  frequently  begins 
before  the  excavation  for  the  foundations.  The 
first  lease  is  often  signed  before  a  single  floor  is 
laid.  For  the  capable  manager  of  office  property  is  ex- 
pected to-day  to  join  forces  with  owner,  engineer  and 
architect  in  the  very  planning  of  the  building.  He  must 
contribute  to  the  consultations  highly  specialized  informa- 
tion as  to  what  qualities  are  necessary  to  make  that 
building  yield  rents  which,  after  expenses  of  mainte- 
nance are  deducted,  will  give  the  proper  net  income  on 
the  investment.  In  this  capacity,  he  acts  as  a  safety 
valve  on  the  architect's  natural  wish  to  create  artistic 
effects.  He  must  limit  the  cost  of  the  projected  building 
to  a  figure  which  will  make  it  possible  for  the  owner 
to  gain  the  proper  net  returns.  He  must  keep  in  mind 
such  material  and  rent-influencing  factors  as  cost  of 
maintenance  and  cleaning,  arrangement  of  floors  and 
light  and  air.  For,  no  matter  ho^  artistic  the  exterior, 
the  entrance  and  the  halls,  the  building  will  not  bring 

72 


Management  of  Office  Buildings 

maximum  rents  if  the  offices  are  improperly  arranged, 
the  windows  too  few  or  too  small,  the  elevator  service 
and  other  conveniences  inadequate.  There  is  also  a 
financial  limit  as  to  the  class  of  office  building  that  will 
pay  in  a  particular  section. 

To  advise  wisely  in  these  several  particulars,  the  man- 
ager or  agent  must  know  the  rental  rates  of  the  district. 
He  must  understand  the  class  of  tenants  that  can  be 
induced  to  enter  the  new  building,  must  be  able  to  fore- 
see if  changes  in  the  character  of  the  neighborhood 
indicate  a  new  class  of  business  inhabitants  able  and 
willing  to  pay  higher  rents  and  therefore  demanding 
better  buildings.  This,  after  all,  is  simply  determining 
in  advance  the  supply  and  demand,  but  as  the  offices 
will  not  be  ready  perhaps  for  a  year  or  more,  it  often 
involves  difficult  anticipation.  This  condition  does  not 
apply  so  much  to  Broadway  property  as  to  the  districts 
occupied  largely  by  special  lines  of  business.  It  is 
sometimes  a  very  nice  problem  to  anticipate  the  tenancy 
of  a  new  office  building  with  three  or  four  hundred 
offices,  erected  in  the  center  of  a  district  apparently 
already  fairly  supplied  with  quarters. 

Cost  of  Maintenance 

On  the  detail  side,  such  advice  must  be  based  on 
thorough  practical  knowledge  of  what  it  costs  to  man 
and  clean  a  building,  to  maintain  its  elevators  and  heat- 
ing and  lighting  plant.  This  involves  knowledge  of  the 
pay  roll  of  help  of  all  sorts — superintendent,  mechanics, 
engineers,  janitors,  scrubwomen,  elevator  men.  Their 
number  and  kind  are  determined  largely  by  the  sort  of 
service  the  building  is  to  offer,  and  the  kind  of  service 

73 


Practical  Real  Estate  Methods 

is  determined  by  the  class  of  building.  Repairs  and 
upkeep  must  be  figured  to  a  nicety;  coal  and  even  oil 
consumption  computed  in  advance.  When  buildings  cost 
from  40  cents  to  $i  a  square  foot  to  maintain,  it  can 
readily  be  seen  that  all  items  which  add  wastefully 
to  the  cost  of  upkeep  must  be  eliminated — that  every 
possible  square  foot  be  used  for  offices.  A  maintenance 
cost  of  $i  may  be  all  right  in  a  building  where  rentals 
are  $2.50  a  square  foot,  but  a  cost  of  even  75  cents  for 
maintenance  would  be  a  bad  proposition  in  offices  renting 
for  $i  a  foot.  The  experienced  manager,  therefore, 
endeavors  to  eliminate  features  that  will  run  up  even 
the  cost  of  keeping  halls  clean.  For  example,  certain 
brass  work  on  the  front  of  a  building  may  require  the 
entire  attention  of  a  single  man  and  his  wages  must 
come  out  of  the  gross  rent  account. 

Limits  of  Artistic  Effect 

The  manager,  however,  must  not  be  considered  a 
hopeless  antagonist  to  artistic  effect.  No  one  appre- 
ciates better  than  he  the  value  of  exterior  and  interior 
ornamentation.  But  there  is  a  limit  to  the  use  of  art. 
A  good  exterior,  to  be  sure,  affects  the  rent.  Of  this 
exterior  the  most  important  part  is  the  entrance  and 
the  first  two  or  three  stories.  Above  these,  so  long  as 
the  building  is  fine  in  appearance,  the  details  of  exterior 
grow  less  important  because  few  people  see  them  in 
our  canon-like  streets.  In  the  case  of  buildings  like  the 
Singer  Building  or  the  Metropolitan  Tower,  the  same 
standards  of  criticism  do  not  apply.  Such  buildings — 
the  home  offices  of  great  companies — are  built  more  as 
men  build  their  own  homes — with  a  view  to  what  people 

74 


Management  of  Office  Buildings 

generally  will  think  of  them.  In  other  words,  they  are 
constructed  to  have  certain  advertising  quality,  to  be 
wonders  for  sightseers,  landmarks  in  their  city.  Here 
decorative  costs  are  not  limited  strictly  to  a  prospective 
rental  basis.  And  yet  there  is  no  question  that  the  very 
advertising  quality  of  such  buildings  enables  them  to 
demand  higher  rents.  For  it  is  undoubtedly  of  ad- 
vantage to  a  tenant  to  be  in  a  building  known  all  over 
the  world,  where  the  address  "Blank  Building,  United 
States,"  is  sufficient.  Moreover,  the  fact  that  every 
one  has  seen  a  picture  of  these  buildings  and  knows 
that  they  are  among  the  finest  office  buildings  in  the 
world,  gives  a  tenant  prestige  when  he  writes  to  some 
one  out  of  town.  Also  the  tenant  shares  in  the  reputa- 
tion of  his  landlord,  for  people  are  certain  that  such 
buildings  would  not  tolerate  tenants  who  were  working 
dishonest  mail  order  schemes.  But  in  buildings  which 
make  no  endeavor  to  become  architectural  wonders  of 
the  world,  ornamentation  must  be  kept  in  proper  ratio, 
be  as  fine  as  rental  profit  permits.  The  same  conditions 
apply  to  entrance  halls,  elevators,  hallways.  Simple 
though  beautiful  decorations  are  wise  in  one  building, 
expensive  marble,  bronze,  brass,  mural  work  are  nec- 
essary in  another.  Economy  or  lavishness  can  be  carried 
too  far. 

Neighborhood  Factors 

The  class  of  possible  tenants  is  the  determining  factor. 
On  Broadway  an  office  building  attracts  all  sorts  of 
tenants.  On  either  side  of  Broadway,  it  must  look  for 
its  tenants  to  the  businesses  which  have  made  that  dis- 
trict their  headquarters.  And  in  seeking  tenants  for 
a  new  building,  it  is  wise  to  go  after  the  leaders  of  a 

75 


Practical  Real  Estate  Methods 

trade.  If  you  get  them,  others  in  the  same  line  will 
have  to  follow.  Sometimes  a  skilful  agent,  by  carefully 
selecting  his  first  tenants,  can  practically  move  an  entire 
trade  to  his  buildings.  An  example  of  this  is  the  way 
in  which  railroad  interests  have  made  the  Hudson  Ter- 
minal Building  their  headquarters,  and  this  field  alone 
made  a  community  of  fine  tenants.  Some  of  these 
trades  require  special  arrangements,  others  need  only 
the  average  layout.  For  example,  dealers  in  precious 
stones  want  north  light  and  woe  be  to  the  owner  who 
erects  a  building  for  this  trade  opposite  a  yellow  build- 
ing. The  reflected  yellow  light  lowers  the  value  of  their 
diamonds.  Other  trades  have  certain  requirements  in 
the  way  of  service  or  convenience  to  the  post  office  or 
some  other  activity  connected  with  their  regular  affairs. 
The  adaptability  of  the  building  to  these  requirements 
materially  influences  its  rentals. 

Laying  Out  Offices 

New  buildings  are  now  constructed  without  ordinary 
partitions.  Offices  are  rented  from  floor  plans,  and  the 
requirements  of  a  tenant  are  generally  expressed  in 
square  feet.  The  tenant  and  manager  then  work  out 
on  the  floor  plans  the  layout  of  separate  offices,  and 
the  partitions  are  put  in.  Here,  if  the  manager  is  wise 
in  his  own  generation,  he  will  guide  the  tenant  away 
from  peculiar  arrangements  which  would  be  totally  un- 
suited  to  any  other  tenant,  and  induce  the  prospective 
occupant  to  accept  as  nearly  a  normal  division  of  his 
space  as  is  possible.  This  frequently  saves  the  ripping 
out  and  rebuilding  of  partitions  at  the  expiration  of 
the  first  lease.  In  most  cases,  tenants  are  entirely  unable 


Management  of  Office  Buildings 

to  judge  real  effects  from  floor  plans,  and  the  agent 
must,  from  long  experience,  be  able  to  guide  them  as 
to  sensible  arrangements  which  do  not  sacrifice  light, 
air  or  convenience.  To  get  at  this,  he  must  frequently 
study  the  sort  of  business  the  tenant  is  to  conduct  and 
show  him  how  best  to  plan  for  it.  The  happiness  or 
satisfaction  of  a  tenant  is  a  valuable  asset,  and  it  is 
better  to  take  pains  to  make  him  comfortable  than  to 
tell  him  repeatedly  afterwards,  "Well,  it's  what  you 
yourself  wanted." 

The  methods  of  securing  tenants  for  buildings  have 
changed  very  materially  in  the  past  few  years  owing 
to  the  practice  of  taking  over  leases.  In  the  old  days, 
an  office  building  manager  kept  records  of  when  leases 
were  to  expire  and  went  after  these  tenants,  to  induce 
them  to  move  to  his  property,  about  three  months  before 
the  expirations.  Nowadays,  however,  the  mere  fact 
that  a  man  has  a  one  or  two  year  lease  doesn't 
count.  The  agents  go  after  him — provided  he  is  de- 
sirable— and  offer  to  take  his  old  lease  off  his  hands 
if  he  will  move  to  the  new  building.  The  owners  of 
the  new  building  figure  that  if  they  do  not -get  the  tenant 
the  space  will  be  vacant  for  a  time  anyhow.  If,  however, 
they  succeed  in  disposing  of  the  old  lease  they  have 
taken  over,  it  is  so  much  profit.  For  the  filling  of  an 
office  adds  but  little  to  maintenance  cost.  If  they  do 
not  get  rid  of  the  transferred  lease,  they  are  no  worse 
off  than  they  would  be  anyhow,  and  they  have  in  their 
building  a  tenant  who  will  bring  in  real  rent  in  a  year 
or  two.  Moreover,  the  rapid  filling  up  of  the  building 
is  desirable  because,  until  the  most  desirable  space  is 
let,  they  cannot  get  the  regular  rate  for  less  desirable 
space.  Still,  this  policy  of  taking  over  leases  has  intro- 

77 


Practical  Real  Estate  Methods 

duced  much  confusion  in  office  property.  An  agent  may 
have  his  building  filled  with  leases  with  two  or  three 
years  to  run  and  feel  that  many  will  renew.  A  new 
building  opens,  grabs  his  tenants  and  leaves  him  in 
the  necessity  of  looking  out  for  a  new  set.  Moreover, 
in  some  cases  the  representatives  of  a  new  building, 
particularly  if  it  is  out  of  the  renting  season,  may  make 
concessions  to  get  rid  ,of  the  transferred  lease  which 
seriously  affect  rental  standards  in  the  old  building. 

Dangerous  Tenants 

Selection  of  tenants,  particularly  in  one  of  the  widely 
known  buildings,  and  even  more  particularly  in  one 
of  the  great  home  office  buildings,  is  very  important. 
In  the  first  place,  a  few  crooked  or  doubtful  tenants  in 
a  building  will  hurt  that  structure  with  solid  business 
men.  One  get-rich-quick  fraud  in  a  building  will  make 
every  legitimate  financial  concern  want  to  move.  One 
lawyer  who  advertises  for  divorce  cases  will  keep  every 
legitimate  practitioner  out.  The  mere  ability  to  pay 
rent  is  far  from  enough;  sometimes  the  worst  frauds 
are  most  prompt  with  their  rents.  A  reference  to  a 
bank,  which,  of  course,  knows  merely  about  the  man's 
legitimate  financial  standing,  therefore,  should  not  suffice 
if  there  is  the  least  suspicion.  For  once  a  building 
gains  the  name  of  harboring  queer  gentry,  it  will  never 
live  down  the  reputation  that  two  or  three  post  office 
fraud  orders  will  give  it.  In  the  case  of  well-known 
buildings,  agents  must  remember  that  tenants  share  in 
the  reputation  of  their  landlord.  It  is  taken  for  granted 
that  people  like  the  Singer  Company  or  a  great  life 
insurance  company  would  have  no  traffic  with  bunco 

78 


Management  of  Office  Buildings 

men.  And  men  with  queer  schemes  are  only  too  glad 
to  have  the  semi-approval  of  their  schemes  which  comes 
from  being  located  in  such  buildings.  It  is,  therefore, 
very  necessary  for  agents  for  such  well-known  buildings 
to  sift  their  tenants  with  a  fine  screen.  And  because  a 
building  is  affected  by  the  class  of  tenants,  it  is  nec- 
essary to  see  to  it  that  the  bootblack  stand,  flower  store, 
barbershop,  candy  store,  cigar  and  news  stands  are  of 
a  character  with  the  building  and  deal  with  their  patrons 
just  as  the  building  deals  with  its  tenants,  justly  and 
considerately. 

Tenant  and  Manager 

The  prosperity  of  the  tenant  is  to  the  interest  of  the 
building.  If  he  cannot  make  a  success  of  his  business 
he  must  move;  if  he  succeeds  he  will  stay  on.  The 
manager,  therefore,  must  see  to  it  that  everything  rea- 
sonable is  done  to  help  the  tenant  succeed.  Halls  and 
offices  must  be  always  in  beautiful  condition.  Elevator 
service  must  be  such  as  makes  it  almost  as  convenient 
to  visit  the  man  on  the  twentieth  story  as  to  drop  into 
a  street  level  store.  He  must  be  certain  that  every  one 
who  comes  to  seek  a  tenant  is  helped  to  find  him  and 
is  treated  courteously  by  hall  men,  elevator  men  and 
other  employees.  Any  attendant  who  was  discourteous 
to  any  one,  stranger  or  not,  should  be  discharged. 

For  my  part,  I  would  much  rather  an  elevator  man 
was  rude  to  a  tenant  than  to  a  customer  of  a  tenant. 
For  the  tenant's  standing  is  affected  by  the  tone  of 
the  building  just  as  a  building  is  affected  by  the  char- 
acter of  its  tenants.  Similarly,  the  manager,  through 
the  superintendent,  should  see  to  it  that  the  offices  of 
the  tenants,  as  far  as  walls  and  floors  and  trim  are 

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Practical  Real  Estate  Methods 

concerned,  are  kept  up  to  the  standard.  It  is  well  to 
have  a  superintendent  inspect  every  room  once  in  a 
while  to  see  what  should  be  done.  In  his  relations  with 
tenants,  the  manager  must  strive  to  make  friends.  He 
will  find  that  few  tenants  are  unreasonable  in  their 
demands — that  is,  as  far  as  high-class  office  buildings 
are  concerned.  In  his  dealings  with  them  the  positive 
attitude  is  important.  If  he  agrees  to  repairs,  he  should 
see  that  they  are  carried  through  at  once.  If  the  repairs 
cannot  be  made,  he  should  say  so  and  not  hedge.  Com- 
plaints should  be  followed  up  closely.  But  the  wise 
agent  will,  as  far  as  possible,  direct  tenants  to  the  super- 
intendent of  the  building  on  the  matters  that  are  di- 
rectly within  his  province.  These  employees,  from  the 
head  down  to  the  scrubwomen,  the  agent  should  see, 
are  the  sort  of  people  who  can  fill  their  positions  suc- 
cessfully and  who  will  in  their  dealings  with  the  public 
carry  out  the  policy  of  the  building.  If  it  is  important 
that  the  building  service  staff  be  always  polite  and 
attentive,  it  is  essential  that  every  one  within  the  man- 
ager's office  be  especially  careful  in  all  his  dealings 
with  tenants — establish  a  reputation  of  regarding  the 
interests  of  tenants  as  paramount. 


So 


HOW  TO  APPRAISE  PROPERTY 

EDWARD  H.  GILBERT 

Fee,  Rental  and  Market  Values — Appraiser's 
Qualifications — Valuing  Parcels  of  Land — Inside 
Lots  and  Corners — Improvements — Income  from 
Buildings— Old  Buildings— Cost  of  Modern 
Buildings 

REAL  property  is  defined  as  land  and  land  only;  it 
does  not  include  anything  growing  out  of  the  land 
or  anything  built  upon  it.  Forests,  growing  crops 
and  buildings  are  additions  to  land  value,  but  they  are 
to  be  considered  as  ephemeral  by  nature,  and  having  the 
characteristics  of  personal  property  only.  The  funda- 
mental characteristic  of  real  property  is  its  permanence. 
Land  is  used  for  all  the  purposes  of  man,  and  its  value 
to  him  is  measured  by  the  degree  of  such  usefulness 
represented  in  money.  This  value  is  based  upon  its 
capacity  to  produce  profit  or  that  form  of  income  known 
as  rent.  The  value  of  land,  therefore,  is  its  rental  value, 
and  its  fee  value  is  the  rental  value  capitalized  at  the 
prevailing  interest  rate  of  money.  For  instance,  a  lot 
which  will  yield  a  net  annual  rental,  free  of  all  charges, 
of  $1,000  may  be  said  to  have  a  rental  value  of  $1,000 
and  a  fee  value  of  that  amount  capitalized  at  say  5%, 
or  $20,000.  The  fee  value  of  land  is  the  value  of  the 
right  to  transfer  the  title,  and  is  the  form  of  value  most 
generally  used  in  this  city,  where  land  is  constantly 
changing  from  one  title  holding  to  another. 

A  leasehold  of  land  is  a  limited  estate  in  the  land  by 
virtue  of  which  the  land  is  transferred  to  the  control 

81 


Practical  Real  Estate  Methods 

of  other  than  the  title  holder,  who  reserves,  however, 
a  stipulated  rental  for  its  use. 

Market  Value 

The  fair  market  value  of  a  fee  holding  of  land  is  the 
price  obtainable  for  it  when  voluntarily  offered  for  sale 
in  the  open  market,  under  equable  and  normal  market 
conditions,  to  the  competition  of  buyers.  Its  fair  rental 
value  is  discoverable  in  the  same  way.  The  fair  market 
value  of  a  leasehold  of  land  is  the  difference  between 
the  amount  of  rental  reserved  in  the  lease  and  amount 
of  rent  obtainable  for  it  when  voluntarily  offered  in  the 
open  market  under  equable  and  normal  market  conditions. 

The  Appraiser's  Qualifications 

The  province  of  the  appraiser  is  to  determine  value 
at  any  given  time  and  under  all  conditions.  He  should 
possess  the  following  qualifications: 

First:  A  solid  experience  in  buying  and  selling  real 
property  covering  a  period  of  several  years.  This  gives 
his  mind  a  kind  of  drill  in  the  habit  of  considering  all 
the  various  conditions  that  affect  value.  In  the  course 
of  his  business  he  is  compelled  to  listen  to  criticisms  of 
property  and  also  to  criticise  it  himself,  and  to  form 
judgments  of  value,  and  to  discuss  values  with  those 
who  are  about  to  buy  or  to  sell  and  whose  interest  is 
most  acute  to  know  values  accurately.  It  is  only  by  thus 
coming  into  direct  contact  with  actual  facts  that  he  can 
make  his  knowledge  practical  and  worth  something  to 
others  as  well  as  to  himself. 

Second:  A  thorough  familiarity  with  neighborhood 
conditions  with  some  knowledge  of  neighborhood  history. 

82 


How  to  Appraise  Property 

Third:  A  broad  knowledge  of  prevailing  industrial 
and  social  developments  at  large,  such  as  will  aid  him 
to  discover  present  tendencies  and  forecast  future  pros- 
pects with  a  fair  degree  of  accuracy.  Temperamentally 
the  appraiser  should  not  be  given  to  great  enthusiasms 
or  undue  depressions.  He  should  always  be  able  to  give 
logical  reasons  for  his  opinions  when  such  are  asked  for, 
and  to  justify  his  judgment  to  the  minds  of  others.  In 
order  to  meet  this  last  requirement  it  will  be  necessary 
for  him  to  found  every  judgment  upon  a  basic  synthesis 
satisfactory  to  his  own  mind,  which,  when  subjected  to 
analysis,  shall  show  every  step  toward  the  conclusion  to 
be  reasonably  established  and  the  conclusion  to  be  a 
just  result. 

Valuing  Parcels  of  Land 

The  preliminary  steps  toward  the  actual  valuation  of 
any  given  parcel  of  property  are: 

The  determination  of  the  value  of  a  single  city  lot 
25x100  situated  midway  in  the  block  on  the  street  or 
avenue  wherein  lies  the  property  to  be  appraised,  and 
from  this  unit  of  value  deducing  the  value  of  that  prop- 
erty as  a  whole. 

Example  for  Four  Lots 

Unit  of  value  on         *4  A^.     Avenue 

Lot  at  center  line ; $10,000 

Next  lot    10,000 

To    lot    adjoining    corner    add    10%    of    unit, 

$10,000  -f  $1,000  = 11,000 

Corner  lot  is  worth  $11,000  plus  60%,  or 17,600 

$48,600 
Add  plottage  10% A ......      4,860 


.    Practical  Real  Estate  Methods 

How  do  we  arrive  at  the  proportionate  differences 
of  value  between  these  four  lots  which  enables  us  to  say 
that  one  lot  is  worth  10%  more  than  the  one  alongside 
of  it  and  not  15%  to  20%  more,  and  that  the  corner 
lot  is  worth  60%  more  than  the  adjoining  lot  and  not 
50%  or  1 00%  more?  These  relative  values  are  ap- 
proximations, and  are  the  result  of  much  observation 
and  the  analysis  of  prices  obtained  at  public  auction  and 
private  sales. 

Let  us  take  a  concrete  example  illustrating  the  reason 
for  the  conclusions  referred  to :  In  1906  at  a  public  auc- 
tion sale  of  vacant  lots  in  the  Borough  of  the  Bronx 
on  Jerome  Avenue,  east  side,  between  2o8th  and  2OQth 
Streets,  several  individual  lots  were  sold,  each  bringing 
$2,800.  At  the  same  time  a  plot  100x100  at  the  northeast 
corner  of  2o8th  Street  and  Jerome  Avenue  was  sold  as 
a  whole  for  $15,100.  The  sale  price  of  individual  lots 
gives  us  the  unit  of  value.  Let  us  apply  it  in  the  manner 
I  have  stated  to  be  customary  with  appraisers: 

Example 

Unit  of  value  lot  at  center  line $2,800 

Next  lot 2,800 

Lot  adjoining  corner,  add  10%  to  $2,800 3,080 

Corner  lot  add  60%  to  $3,080 4,928 


$13,608 
Add  plottage  10% 1,360 

Total $14,968 

which  is  approximately  the  price  actually  obtained  for 
the  plot  looxioo  as  a  whole.  At  this  sale  all  the  con- 
ditions were  present  which  make  this  example  fairly 
applicable  in  support  of  the  theory. 

84 


How  to  Appraise  Property 

There  are,  however,  exceptions  to  this  theory  of  rela- 
tive values.  In  factory  districts  it  is  often  the  case  that 
the  value  of  the  corner  lot  is  rated  at  only  50%  more 
than  the  value  of  the  lot  adjoining.  This  is  due  to  the 
fact  that  the  relative  value  of  the  area  to  the  frontage 
is  greater  in  factory  lots  than  it  is  in  lots  the  availability 
of  whose  entire  area  is  limited  by  law,  or  in  lots  where 
window  display  would  make  the  frontage  relatively  of 
greater  proportionate  value  than  the  area. 

Corner  Lots 

What  is  it  that  makes  a  corner  lot  worth  any  more  than 
an  inside  lot? 

ist.  Superior  situation  with  reference  to  light  and  air. 

2nd.  Greater  frontage  for  purpose  of  display  and  con- 
tiguity to  passing  crowds  or  possible  buyers. 

3rd.  Objective  prominence  for  advertising  advantage. 

These  are  great  considerations. 

The  corner  lot  shows  a  frontage  of  125  feet,  as  against 
only  25  feet  for  an  inside  lot.  It  has  a  space  of  between 
50  and  100  feet  between  it  and  any  other  building  on 
this  frontage  and  the  opportunity  to  display  goods  is 
very  much  more  extended,  while  it  projects  into  the 
thoroughfare  and  commands  attention. 

Improvements 

The  value  of  land,  however,  is  not  the  only  value 
which  the  appraiser  of  real  estate  is  called  upon  to  es- 
timate. It  is  required  of  him  that  he  shall  be  able  cor- 
rectly to  assign  a  market  value  to  a  combination  of  the 
land  and  any  structural  improvement  that  may  have  been 
erected  on  it.  In  order  to  be  able  to  do  this,  however, 

85 


Practical  Real  Estate  Methods 

he  does  not  have  to  qualify  as  an  expert  in  construction. 
He  does  not  have  to  have  a  technical  knowledge  of  the 
trades  or  of  architecture.  It  will  be  noted  that  all  that 
can  be  required  of  him  is  his  judgment  of  value  as  a 
trader — that  is  to  say,  the  market  value  or  what  the 
whole  property  would  bring  in  the  market  if  offered 
for  sale.  This  is  the  value  that  is  required  for  the  pur- 
pose of  placing  mortgage  loans,  or  of  purchasing,  or  for 
purposes  of  taxation. 

What  the  building  cost  to  construct,  or  what  the  mate- 
rials in  it  may  have  cost  in  themselves,  does  not  neces- 
sarily enter  as  a  factor  into  the  market  value  of  the 
whole.  The  appraiser,  therefore,  does  not  have  to  es- 
timate the  cost  of  construction  in  all  cases,  though  where 
a  new  structure  perfectly  adapted  to  its  situation  and 
purpose  is  to  be  valued  in  connection  with  the  land,  the 
cost  of  same  is  usually  estimated  and  added  to  the  land 
valuation  to  produce  value  of  the  whole. 

If,  however,  the  building,  though  new,  is  not  adapted 
to  the  purpose  for  which  it  was  built,  or  is  ill  situated 
(as  a  private  dwelling  in  a  factory  district),  its  value 
would  be  considerably  less  than  its  cost  and  would  be 
based  upon  the  degree  of  its  general  or  special  usefulness. 
It  might  be  that  such  a  structure,  though  new,  should 
be  considered  to  have  no  market  value  whatever  because 
it  was  an  inadequate  improvement  of  the  lot.  All  build- 
ings depreciate  in  value  through  wear  and  tear  and  by 
reason  of  neighborhood  changes  affecting  their  useful- 
ness. 

We  estimate  that  fifty  years  is  the  full  life  of  a  building 
in  New  York  City,  for  if  at  the  end  of  that  time  it  still 
be  as  substantial  as  ever,  which  is  quite  possible,  it  has 
become  old-fashioned  and  ill  adapted  to  modern  wants 

86 


How  to  Appraise  Property 

and  its  value  has  merged  with  the  value  of  the  land 
under  it.  Hence  we  have  to-day  large  sections  of  Man- 
hattan Island,  apparently  covered  with  substantial  im- 
provements, that  are  just  waiting  a  market  movement 
to  show  themselves  as  really  so  much  land  ready  for 
the  builder. 

Income  from  Improvements 

Fundamentally  the  only  measure  of  the  value  of  a 
building  which  is  practicable  is  that  of  rental  or  profit; 
and  the  value  of  any  building  is  better  determined  upon 
its  income,  as  a  measure  of  its  adaptability  and  usefulness, 
than  in  any  other  way. 

Example 

If  we  take  a  lot  25  x  100  to  be  worth A. . .  .$20,000 

And  allow  that  it  should  yield  5%  net  to  the 

owner  in  rental,  we  have,  as  its  rental  value    1,000 

If  we  erect  upon  this  lot  a  six-story  modern  tenement 
at  a  cost  of  $25,000,  we  have  av  total  investment  of 
$45,000,  upon  which  we  find  that,  according  to  the  aver- 
age rate  of  interest  on  equal  security  we  ought  to  get 
5%  net  out  of  the  ground  value  and  6%  net  out  of  the 
building  value,  or  $2,500  clear  per  year  out  of  the  whole. 
At  this  rate  the  lot  portion  of  the  investment  pays  $1,000 
and  the  building  $1,500.  * 

Upon  estimating  the  cost  of  operating  such  a  tenement, 
where  hot  water  (but  not  steam  heat)  is  supplied  night 
and  day  to  the  tenants,  and  allowing  $500  per  year  for 
depreciation  in  value,  we  find  that  it  will  be  necessary 
to  get  a  gross  rental  of  at  least  $4,800  for  the  whole, 
to  be  collected  from  tenants  occupying  52  or  65  rooms. 
In  order  to  pay  such  an  aggregate  rental  each  tenant 

87 


Practical  Real  Estate  Methods 

will  be  obliged  to  contribute  about  six  dollars  per  room 
per  month. 

If  this  estimated  rental  proves  to  be  higher  than  that 
which  is  paid  by  others  in  the  same  or  a  similar  locality, 
then  such  a  tenement  is  not  the  proper  improvement  for 
the  lot,  or  is  not  the  most  economical  form  of  improve- 
ment. In  order  to  make  this  lot  available  for  the  purpose 
of  a  tenement  house  improvement,  therefore,  it  becomes 
necessary  to  adopt  a  more  economical  method  of  im- 
provement. 

Another  lot  at  $20,000  adjoining  is,  therefore,  added, 
and  the  new  six-story  improvement  covering  70%  of 
50x100  will  contain  double  the  number  of  rooms,  and 
will  cost  only  $45,000  to  build,  a  saving  of  $5,000  in 
construction.  This  makes  the  investment  $85,000  and 
the  gross  rental  $9,600.  In  this  house  only  one  staircase 
is  required,  with  its  well  for  an  area  twice  as  large  as 
in  the  first  instance,  and  but  one  hot  water  heating  plant 
of  a  little  larger  size,  so  that  proportionately  the  cost  of 
operation  is  considerably  decreased  and  the  whole  pro- 
position becomes  more  valuable  because  it  is  more  prof- 
itable. 

This  little  sketch  of  the  treatment  of  a  city  lot  may 
give  you  an  insight  into  the  proportionate  relations  of 
gross  and  net  rentals  to  fee  values  and  cost  of  building. 
In  estimating  the  value  of  real  estate  which  comprehends 
the  value  of  the  improvements  thereon,  we  usually  classify 
the  various  common  forms  of  such  improvements  about 
as  follows: 

Value  of  Old  Buildings 

Of  old  buildings  which  are  no  longer  an  adequate 
improvement  to  the  lot  on  which  they  stand,  we  say  that 

88 


How  to  Appraise  Property 

their  value  has  merged  with  the  value  of  the  land  and 
is  inconsiderable.  Old  buildings  which  by  the  addition 
of  some  improvements  may  be  reclaimed  to  adequacy 
for  a  time  and,  as  it  were,  given  a  new  lease  of  life — 
to  these  a  certain  allowance  of  value  is  given  based  upon 
the  time  they  are  likely  to  remain  profitable. 

Cost  of  Modern  Buildings 

Five-story  tenements,  built  on  25x100,  cost,  as  is  well 
known,  within  the  limit  of  $15,000  to  $20,000,  or  at  the 
rate  of  eleven  to  fifteen  cents  per  cubic  foot. 

Six-story  modern  non-fireproof  tenements,  without 
elevators,  commonly  known  as  "walk  ups,"  cost  from 
twelve  to  sixteen  cents  per  cubic  foot  to  construct  and 
are  usually  built  on  lots  larger  than  25x100,  of  which 
they  cannot  cover  more  than  70%  of  a  lot,  where  the 
old  style  twenty-five  foot  house  could  use  75%  of  the 
lot.  They  are  usually  of  very  cheap  construction  and 
built  to  accommodate  the  families  of  day  laborers  whose 
earnings  are  near  the  bottom  of  the  scale. 

Six-story  elevator  apartment  dwellings,  non-fireproof, 
cost  from  fifteen  to  eighteen  cents  per  cubic  foot  to  build, 
and  accommodate  quite  a  large  class  of  people  who  are 
able  to  pay  from  $7  to  $10  per  room  per  month. 

Seven-story  elevator  apartment  dwellings  which  are 
called  semi-fireproof,  vary  in  cost  between  somewhat 
wider  limits,  fireproof  apartment  dwellings  of  greater 
height  costing  from  twenty-five  to  fifty  cents  per  cubic 
foot  to  erect. 

Non-fireproof  store  and  loft  buildings  cost  twelve  to 
eighteen  cents  per  cubic  foot  and  the  same,  called  fire- 
proof, to  any  height,  built  of  steel,  cost  from  eighteen 
to  thirty-five  cents  per  cubic  foot. 


Practical  Real  Estate  Methods 

Office  buildings  cost  from  twenty-five  to  fifty  cents 
per  cubic  foot. 

Stable  property,  garages  and  factories  cost  from  fifteen 
to  twenty-five  cents  per  cubic  foot,  according  to  charac- 
ter of  construction. 

New  buildings  are  estimated  at  what  they  probably 
cost,  and  the  value  of  the  land  is  added  to  that  to  obtain 
the  value  of  all. 

The  process  of  computing  the  cost -of  construction  is 
to  obtain  the  area  of  land  covered,  the  height  of  the 
building,  calculate  its  cubical  contents  in  feet,  and  mul- 
tiply by  the  figure  determined  upon  as  probably  repre- 
sentative of  the  cost  of  building  per  cubic  foot. 

Example 

To  illustrate,  take  a  corner  property  six  stories  high, 
covering  90%  of  a  rectangular  plot  of  four  city  lots, 
or  looxioo,  at  the  corner  of  an  intersecting  street  and 
avenue.  This  shows  an  area  covered  of  9,000  square 
feet  with  twelve  feet  between  floors  or  84  feet  in  height 
above  cellar  bottom. 

9,000  x  84  =  756,000  cubic  feet. 

Say  that  the  character  of  construction  warrants  a  cost 
unit  of  1 8  cents  per  cubic  foot,  we  have  then  756,000 
cubic  feet  by  18  cents  or  $136,080. 

Supposing  the  land  to  be  worth  $20,000  per  city  lot 
as  a  land  unit  of  value.  Then  100x100,  as  a  corner, 
following  the  method  of  land  valuation  outlined  at  the 
beginning  of  the  lecture,  would  develop  a  full  value  as 
follows : 

90 


How  to  Appraise  Property 

Lot  at  center  line $20,000 

Next  lot  adjoining  lot 20,000 

Lot  adjoining  corner  (unit  plus  10%) 22,000 

Corner  lot  ($22,000  plus  60%) 35,200 

$97,200 
Add  plottage  at  10% 9,720 

Total  land  value $106,920 

Value  of  building  (cost) 136,080 

$243,000 
Add  10%  for  builders'  profit 24,300 

Total  appraised  value $267,300 

The  unit  of  cost  of  construction  is  worked  out  from 
the  average  experience  of  the  appraisers.  The  cost  of 
a  number  of  typical  buildings  is  ascertained  to  lie  within 
certain  limits,  and  constant  association  of  those  units  so 
derived  with  certain  forms  and  appearances  of  construc- 
tion has  enabled  us  to  make  close  approximations  of 
actual  cost  (or  what  that  cost  should  reasonably  have 
been),  to  suit  the  purpose  for  which  the  building  was 
erected. 


POINTS  TO  BE  CONSIDERED  IN 
VALUING  A  BUILDING 


G.  RICHARD  DAVIS 

Quality  of  Construction — Finish — Area  and  Charac- 
ter of  Buildings — Equipment — Cost — Expense  and 
Maintenance  —  Income  —  Architectural  Features  — 
Character  of  Location — Suitability  of  Improvement 

THE   ultimate   result   desired   by   all   those   seeking 
knowledge  relating  to  improved  real  estate  and 
building  construction  is  to  be  able  to  value  such 
property  intelligently  and  properly. 

There  are  nine  points  which  are  material  in  deter- 
mining the  value  of  improved  property. 

I.  Height  and  area  of  the  building. 

II.  Character  of  the  building,  and  whether  it  is  fire- 
proof or  non-fireproof. 

III.  Quality  of  construction,  finish  and  equipment. 

IV.  Cost.   " 

V.  Running  expense  and  expense  of  maintenance. 

VI.  Income. 

*[This  chapter  is  but  a  brief  summary  of  a  few  of  the  many 
salient  points  of  building  construction  developed  by  Mr.  Davis 
in  his  lectures  on  "Practical  Building  for  Real  Estate  Men  and 
Owners."  A  second  volume  which  will  give  in  detail  all  points 
of  construction  that  real  estate  brokers,  appraisers  and  owners 
should  know  to  value  a  building,  intelligently  or  to  criticise  a 
building  under  construction,  is  now  in  course  of  preparation 
by  Mr.  Davis.  The  West  Side  Young  Men's  Christian  Associa- 
tion will  publish  the  book.— EDITOR'S  NOTE.] 

92 


Points  in  Valuing  Buildings 

VII.  Architectural  features,  including  arrangement  and 
design. 

VIII.  Character  of  the  location. 

IX.  Suitability  of  the  improvement  for  the  site. 


Height  and  Area — In  the  chapter  on  Building  Loans, 
page  212,  the  method  of  determining  the  ground  area 
of  a  building  is  outlined,  and  the  height  is  apparent  upon 
inspection. 

II 

Character  of  Building — The  character  of  a  build- 
ing may  be  determined  by  the  plans  when  filed  in  the 
department,  showing  whether  it  is  fireproof  or  non-fire- 
proof construction,  and  whether  it  is  to  be  a  dwelling- 
house,  tenement,  or  business  building,  etc. 


Ill— QUALITY  OF  CONSTRUCTION 

Foundations — It  is  impossible  to  tell  in  the  finished 
building  whether  the  foundations  were  put  in  correctly 
and  substantially  or  not,  but  cracks  in  the  stone  work 
or  in  the  brick  work,  particularly  in  the  window  arches, 
lintels  and  sills,  and  in  small  brick  piers,  indicate  a 
settling  which  is  due  to  either  faulty  mason  work  or 
foundation  work — generally  the  latter.  A  house  built 
upon  rock  foundation  is  always  superior  to  that  built 
upon  any  other  foundation  soil,  and,  if  possible,  the 
character  of  the  footings  should  be  ascertained,  either 
by  borings  in  the  yard  or  cellar,  or  by  reliable  hearsay 
evidence.  In  tall  buildings,  the  obtaining  of  a  certificate 

93 


Practical  Real  Estate  Methods 

from  an  engineer  as  to  the  character  of  the  foundation 
work  is  almost  an  essential,  and  a  buyer  of  improved 
property  of  this  character  should  hesitate  before  investing 
until  he  has  ascertained  the  manner  in  which  the  founda- 
tions have  been  put  in,  and  as  to  the  character  of  the 
under-soil. 

Brick  Work — Well  laid  brick  work  will  show  the  ver- 
tical joints  on  line  and  a  smooth  and  plumb  front  surface. 
This  is  true  both  as  to  front  brick,  and  particularly  so 
as  to  the  rough  work  in  the  courts  and  yard.  An  im- 
pervious brick  is  better  than  an  absorbent  pressed  clay 
brick.  The  former  resists  the  moisture,  while  the  latter 
is  apt  to  cause  dampness  inside  the  building. 

Stone  Work — Stone  is  used  for  the  purpose  of  deco- 
rating front  and  gable  walls  of  buildings,  for  stoops, 
etc.  White  Indiana  limestone  is  commonly  used  in  this 
city.  There  is  also  a  red  limestone  that  is  sometimes 
seen.  Brown  stone  is  now  out  of  use,  but  very  common 
up  to  ten  years  ago.  Granite  is  much  harder  than  lime- 
stone, and  is  more  expensive  to  cut  and  dress.  It  is 
rarely  used  as  ashlar  or  for  front  stone  work  except  in 
large  public  buildings ;  but  it  is  largely  used  for  exposed 
foundation  facings,  stoop  platforms,  water-tables,  corner- 
stones, railings,  etc.  Marble  is  the  choicest  stone  that 
can  be  used  for  fine  work,  and  is  hard  and  admits  of 
great  ornamentation  with  carving. 

Terra  Cotta — Terra  cotta  is  used  in  place  of  stone 
for  ornamental  purposes.  It  lacks  the  strength  and 
even  surface  of  stone,  and  is  a  poor  substitute  if  used 
in  continuous  courses,  but  is  most  desirable  when  used 
for  ornament  with  brick  work,  in  band  courses,  or  for 
cornice  courses,  quoins,  arches,  etc. 

A  sufficient  amount  of  stone  and  terra  cotta  should 

94 


Points  in  Valuing  Buildings 

be  used  in  ornamenting  the  front  to  present  a  pleasing 
and  effective  result.  An  attractive  front,  with  handsome 
stone  work  and  ornamental  terra  cotta  is  very  pleasing 
to  tenants,  and  influences  the  rental  value  of  a  building. 

Cornice — The  cornice  of  a  non-fireproof  building  is 
generally  of  galvanized  iron  made  in  ornamental  design, 
and  anchored  to  the  roof  beams  and  the  brick  work. 
Sometimes  the  cornice  is  made  of  copper,  which  is  the 
most  durable,  and  sometimes  the  brick  work  is  continued 
up  above  the  roof  and  finished  with  a  decorated  coping 
wall  or  cornice  wall  of  terra  cotta,  forming  a  part  of. 
the  facade. 

A  copper  cornice,  instead  of  one  of  galvanized  iron, 
indicates  the  use  of  the  best  possible  material  for  that 
purpose,  with  the  consequent  increase  in  wearing  quality 
and  less  cost  of  maintenance. 

The  ornamental  railings  of  cast  iron  about  a  building 
should  be  of  pleasing  appearance  and  sufficiently  heavy 
to  withstand  wear.  Note  should  be  taken  that  they  are 
properly  set  and  painted. 

Entrance  Vestibule — Upon  entering  the  building,  the 
size  of  the  vestibule  and  entrance  hall  should  be  noted, 
and  how  it  is  finished;  the  quality  of  the  wainscoting 
and  its  height.  If  a  public  hall  is  wainscoted  with  marble 
at  least  five  feet  high  it  will  prevent  the  hand  soiling 
of  a  decorated  wall,  which  is  costly  to  repair. 

A  mosaic  or  marble  floor  is  more  expensive  and  more 
durable  than  a  ceramic  floor.  The  use  of  a  hard  marble 
is  more  desirable  than  a  soft  one,  as  soft  marble  is 
absorbent  and  will  stain  very  readily,  and  after  a  few 
years  becomes  very  unsightly.  The  quality  of  the  marble 
treads  of  the  stairs  and  the  marble  base  in  the  public 
hall  landings  should  likewise  be  noted,  and  as  these 

95 


Practical  Real  Estate  Methods 

landings  and  stairs  are  being  constantly  washed,  the  use 
of  soft  marble  is  particularly  undesirable.  The  marble 
base  should  be  continued  underneath  the  entrance  door 
trim,  in  the  form  of  plinth  blocks,  to  prevent  the  soiling 
of  the  trim  by  the  scrubbing  to  which  the  tiled  floors 
and  base  are  constantly  subjected. 

The  use  of  a  heavy  canvas  or  wall  paper  is  more 
desirable  than  a  plain  plastered  wall  for  public  halls  and 
stairs,  particularly  in  buildings  without  elevators,  as  in 
the  latter  case  trunks  and  furniture  are  carried  up  the 
stairs,  with  the  resultant  breaking  and  marring  of  the 
walls,  which  would  be  lessened  or  avoided  by  the  use 
of  some  such  material. 

Elevator — If  the  building  contains  an  elevator,  the 
latter  should  be  examined  as  to  its  speed,  smoothness 
of  running,  and  its  size.  Note  should  also  be  taken  of 
the  finish  of  the  interior  of  the  car,  as  a  slight  indication 
of  the  quality  of  the  workmanship.  Expert  advice  may 
be  taken  as  to  the  electric  equipment  of  the  elevator, 
but  this  is  hardly  necessary  except  in  large  and  im- 
portant buildings. 

The  electrically  run  elevator  is  practically  universal  in 
apartment  houses,  business  buildings,  etc.  The  plunger 
elevator,  which  is  a  combination  electric  and  hydraulic 
one,  seen  in  large  office  buildings  and  in  some  apartment 
houses,  is  much  more  expensive  to  install,  but  has  the 
additional  factors  of  safety  and  speed,  which  is  much 
desired  in  high  buildings.  The  ordinary  steam  powered 
hydraulic  elevator  is  now  rarely  used. 

Roof — The  use  of  a  tile  roof  is  expensive  but  very 
desirable,  as  its  duration  of  wear  is  practically  unlimited. 
However,  its  cost  is  so  much  greater  than  that  of  a 
slag  or  plastic  slate  roof  that  the  latter,  from  the  stand- 

96 


Points  in  Valuing  Buildings 

point  of  economy,  must  generally  be  preferred.  Both 
of  these  kinds  of  roofs  are  easier  to  repair  than  any 
metal  roof,  and  are  much  preferable.  The  use  of  heavy 
tar  paper,  laid  on  top  of  the  finished  slag  or  plastic  slate 
roof,  serves  to  protect  it  from  damage  due  to  walking 
upon  it,  and  is  more  effective  than  gravel,  which  is  used 
for  the  same  purpose. 

Flashing — The  use  of  copper  flashings,  gutters  and 
leaders  is  desirable,  and  indicates  substantial  construc- 
tion, although  good  galvanized  iron,  if  well  painted,  is 
extremely  durable  and  gives  excellent  results,  and  is  most 
commonly  used  in  six-story  buildings  or  those  of  lesser 
height. 

If  a  plastic  slate  roof  is  used,  plastic  slate  may  be 
used  for  flashing.  It  is  most  important  to  have  the  roof 
watertight,  and  the  flashing  of  the  roof  is  one  of  the 
most  necessary  things  to  have  done  properly.  To  make 
a  thoroughly  good  job  of  flashing,  where  metal  is  used, 
the  flashing  should  be  continued  completely  through  the 
brick  work  or  coping  wall,  and  all  plumbing  pipes  run- 
ning through  the  roof  should  pass  through  a  lead  collar 
and  sleeve,  made  fast  to  the  roof  covering,  and  flashed 
with  copper  and  then  counter-flashed — i.  e.,  a  cap  flashing 
run  around  the  pipe  some  six  inches  above  the  roof. 

Where  plastic  material  is  used  for  flashing,  the  higher 
the  fire  walls  are  flashed  the  better  the  result. 

Drying  Frames — The  use  of  the  best  construction  for 
drying  frames  is  desirable,  as  the  expense  is  very  little 
more,  the  cost  of  maintenance  is  one-half,  and  the  roof 
is  much  more  readily  kept  watertight.  Drying  frames 
are  placed  on  the  roofs  of  apartment  houses,  for  drying 
clothes  in  the  open  air,  and  are  built  of  angle  irons  which 
are  fastened  to  the  roof  beams  and  run  through  the  roof, 

97 


Practical  Real  Estate  Methods 

or  else  are  connected  with  a  wooden  platform,  or  one 
built  of  angle  iron,  with  runs  laid  on  the  roof,  but  not 
going  through  it,  the  upright  angles  being  braced  or 
secured  by  additional  braces  connected  with  the  platform. 
The  latter  method  is  by  far  the  most  desirable,  for,  when 
the  angle  irons  or  uprights  run  through  the  roof  and 
connect  with  the  beams,  the  weight  of  the  clothes  upon 
them  gradually  causes  them  to  work  loose  and  to  break 
the  flashing,  either  of  copper  or  tar,  around  where  they 
pass  through  the  roof,  and  results  in  leaks,  this  being 
one  of  the  most  common  causes  of  roof  leaking.  Besides 
this,  using  a  wooden  platform  for  fastening  the  angle 
irons  to,  serves  a  double  purpose  by  protecting  the 
roof  where  it  is  most  walked  upon  by  the  maids  when 
hanging  up  the  clothes  to  dry. 

Clothes  Driers — Clothes  driers  are  installed  in  apart- 
ment houses  for  the  purpose  of  drying  clothes  when  the 
weather  is  such  as  to  prevent  the  clothes  being  hung 
out  of  doors.  These  driers  are  heated  either  by  steam 
or  gas,  and  should  have  steam  coils  in  the  bottom,  with 
a  grating  above  to  protect  the  clothes  from  being  burned 
by  the  coil.  Where  gas  is  used,  a  similar  protection 
should  be  adopted.  A  combination  gas  and  steam  drier 
is  most  desirable,  as  in  winter  time  the  use  of  steam 
heats  the  drier  at  little  or  no  expense  to  the  owner, 
whereas  in  the  summer  the  gas  has  less  demand  upon 
it,  and  the  drier  costs  but  little  to  maintain. 

Leaders — The  use  of  interior  leaders  in  preference 
to  exterior  ones  is  desirable,  but  they  are  generally  used 
in  buildings  ten  or  twelve  stories  in  height  or  over. 

Roof  Tanks — A  roof  tank  is  a  necessity  in  tall  build- 
ings and  in  many  six-story  buildings.  They  are  also 
needed  wherever  a  Flushometer  valve  is  used.  These 

98 


Points  in  Valuing  Buildings 

tanks  are  built  either  of  cedar  wood  or  of  boiler  iron, 
and  should  be  frost-proofed  with  a  double  bottom  and  top 
and  a  double  lining  at  the  sides,  thus  creating  an  air  space, 
or  by  running  a  steam  coil  to  the  top  of  the  tank,  or 
by  putting  the  tank  in  a  heated  pent-house,  built  espe- 
cially for  it. 

The  law  requires  the  bottom  of  all  tanks  on  fireproof 
buildings  to  be  20  feet  above  the  highest  outlet  of  the 
fire  standpipe  line  on  the  top  floor,  so  as  to  give  the 
necessary  pressure.  This  explains  why  tanks  on  fireproof 
buildings  are  put  up  in  the  air,  disfiguring  the  building 
from  an  artistic  standpoint,  but  being  very  necessary 
for  adequate  fire  protection. 

Note  should  be  taken  that  the  water  tanks  are  adequate 
in  size,  and  properly  protected  from  frost. 

Fireproof  Doors — Upon  entering  each  apartment  note 
should  be  taken  of  the  character  of  the  fireproof  entrance 
doors.  The  entrance  doors  to  all  apartments,  and  the 
trim  around  these  doors,  and  all  the  woodwork  in  any 
of  the  public  halls  must  be  fireproof  in  all  apartment 
houses  and  in  all  fireproof  buildings.  These  doors  may 
be  made  of  copper,  steel,  hollow  steel,  or  of  wood  cov- 
ered with  metal.  The  window  openings  on  all  public 
halls  must  be  trimmed  in  like  manner.  The  use  of  hollow 
steel  is  more  desirable  than  the  use  of  Kalamein  (wood 
covered  with  metal),  and  the  wearing  qualities  of  the 
former  are  much  greater  and  present  a  more  effective 
appearance  if  properly  finished.  A  cheap  Kalamein  door 
will  buckle,  but  a  well-made  one  is  desirable  and  durable. 
Copper  or  bronze  makes  a  more  handsome  but  a  more 
costly  substitute. 

Floors — Note  should  be  taken  of  the  floors.  Oak 
flooring  wear-s  better  than  pine.  Maple  is  hard,  but 

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Practical  Real  Estate  Methods 

shrinks  more  readily  than  oak,  and  is  more  easily  soiled. 
Oak,  therefore,  makes  the  most  durable  floor.  Flooring 
%  in.  thick  wears  better  than  J£  in.  flooring,  although 
the  latter  is  permissible,  and  gives  good  service  in  a 
non-fireproof  house  if  properly  laid.  The  difference 
between  the  two  may  be  readily  distinguished  by  the 
nails,  the  heads  of  which  show  when  ^  in.  flooring 
is  used,  whereas  the  %  in.  flooring  is  blind-nailed  from 
the  side,  and  the  nail  heads  cannot  be  seen. 

The  cost  of  maintaining  a  parquet  floor  is  greater 
than  that  of  a  plain  floor. 

Trim — In  considering  the  wood  work,  the  height  of 
the  base,  the  wainscot,  if  any,  the  paneling  of  the  doors, 
and  the  general  fit  and  design  of  the  trim  should  be 
noted.  A  high  base,  handsome  wainscot  and  substantial 
trim  are  attractive  to  tenants  and  assist  in  producing 
income.  Heavy  trim  is  not  always  desirable,  but  trim 
that  is  too  light,  a  door  which  is  badly  made  and  hung, 
and  that  has  too  many  panels  in  it,  and  a  base  which 
is  too  low,  indicate  a  cutting  down  of  expense  and 
possibly  poor  construction. 

All  buildings  not  over  twelve  stories  high  are  trimmed 
with  non-fireproof  wood.  The  upright  trim  is  known 
as  standing  trim,  and  the  doors,  wardrobes,  etc.,  are  often 
called  hanging  trim.  Oak,  birch,  cypress,  maple,  hazel, 
poplar  or  whitewood,  and  mahogany  are  the  commonly 
used  woods  to-day  for  trimming  apartment  houses  and 
business  buildings.  Oak  is  the  most  durable  of  the 
cheaper  woods.  Quarter-sawn,  or  quartered  oak,  as  it 
is  called,  makes  a  very  durable  and  substantial  trim. 
Mahogany  is  the  most  expensive,  and  an  effective  sub- 
stitute is  found  in  birch,  which,  when  properly  stained 
and  finished,  resembles  the  former  very  closely.  Curly 

100 


Points  in  Valuing  BuiHings 

birch,  which  is  full  of  hearts  and  quirks  and  curls,  is 
exceptionally  pretty  and  is  used  for  panels,  etc. 

To  prevent  dampness  from  the  plaster  working  into 
the  trim  and  splitting  or  warping  it,  the  back  of  all 
trim  surfaces  which  are  over  six  inches  in  width  should 
be  painted  with  a  damp-proof  paint.  This  is  particularly 
true  of  the  panels  in  wainscoting,  panel  backs  and  other 
large  surfaces  of  trim  that  come  in  contact  with  the 
plaster. 

The  use  of  white  paint  and  enamel  is  very  general 
in  apartment  houses.  It  costs  more  to  maintain,  but 
is  very  effective,  and,  under  most  conditions,  its  de- 
sirability, from  the  standpoint  of  the  tenant,  will  create 
an  added  income  sufficient  to  offset  the  extra  cost  of 
maintenance. 

The  use  of  soft  wood  in  any  apartment  house  is 
undesirable  for  trim,  as  it  does  not  wear,  is  less  lasting, 
and  apt  to  become  unsanitary.  Hazel  or  birch  makes  a 
most  desirable  wood  for  white  enameling.  Cypress  is 
undesirable,  and  whitewood,  although  taking  the  paint 
well,  is  too  soft  to  be  durable. 

Carpenter  Work — When  it  can  be  noted  in  a  new 
house  that  the  base  around  the  room  has  broken  away 
from  the  wall,  that  the  window  casings  are  not  flush  with 
the  plaster,  that  the  doors  fail  to  hang  true,  and  the 
jambs  and  trim  are  out  of  plumb,  it  is  an  evidence  of 
poor  carpenter  work,  both  as  to  the  finished  wood  work 
and  the  rough  framing  and  ground  work,  and  a  further 
indication  of  poor  construction. 

Tiling — Note  should  be  made  of  the  tile  in  bathrooms, 
etc.,  to  see  whether  it  is  firmly  and  smoothly  set ;  whether 
a  sanitary  cove  or  rounded  floor  angle  has  been  used, 
and  whether  the  floor  is  level  and  well  grouted  with 

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Practical  Real  Estate  Methods 

cement.  Cracked  and  loose  tiling  in  a  comparatively 
new  house  indicates  poor  work,  either  in  the  tiling  or 
in  the  preparation  of  the  walls  before  tiling.  One  of 
the  causes  of  tiling  falling  off  walls  is  the  use  of  wooden 
lath  instead  of  metal  lath  for  the  preliminary  work  of 
bathroom  wainscoting. 

The  tile  work  of  public  halls  should  also  be  noted. 

Plumbing — Plumbing  is  an  important  feature  in  the 
house,  but  one  which  the  layman  finds  difficult  to  crit- 
icise intelligently.  Note  can  be  taken,  however,  of  the 
character  of  the  fixtures,  whether  they  are  porcelain  or 
iron  enamel,  or  of  still  cheaper  material.  The  general 
appearance  indicates  the  general  character  of  the  plumb- 
ing job,  and  the  various  plumbing  connections  show 
plainly  the  character  of  the  plumber's  workmanship.  A 
well-nickeled,  well-set  connection  is  easily  noted.  A 
cheaply  made  and  poorly  mounted  connection  indicates 
cheap  material  and  careless  workmanship,  and  it  is  fair 
to  assume  that  where  the  exposed  plumbing  work  is 
poor,  that  the  work  which  is  hidden  is  of  the  same  char- 
acter. 

Note  should  be  taken  that  the  washtubs  and  sinks 
are  large  enough  for  reasonable  services,  and  that  all 
fixture  connections  are  of  nickeled  brass. 

The  investor  planning  to  purchase  a  large  and  im- 
portant building  may  well  employ  the  services  of  an 
experienced  plumber  or  sanitary  engineer,  to  examine 
the  technical  features  of  the  plumbing  work,  so  as  to 
advise  him  as  to  their  adequacy,  suitability,  etc. 

Steam  Heating — What  has  been  said  as  to  plumbing 
is  particularly  true  of  the  steam  heating.  The  radiator 
in  a  room  is  the  only  outward  evidence  we  can  see  of 
the  heating  apparatus  in  apartments.  The  size  of  the 

102 


Points  in  Valuing  Buildings 

radiator  and  the  quality  of  the  air,  and  the  controlling 
valves,  may  be  considered;  also  the  radiator  should  be 
placed  in  front  of  a  window,  or  as  near  a  window  as 
possible,  so  as  to  give  the  greatest  amount  of  efficiency 
with  the  least  amount  of  heat  consumption.  Radiators 
are  often  ill  placed  for  the  sake  of  saving  rising  lines 
to  connect  them,  or  to  overcome  the  expense  of  running 
long  lines  of  branches. 

Horizontal  tubular  boilers,  or  upright  sectional  boilers, 
are  most  commonly  used  for  heating  apartment  houses 
and  business  buildings.  High  pressure  heating  plants 
are  used  where  power  is  required,  or  where  a  great 
deal  of  heat  is  necessary,  and  in  such  cases  the  boilers 
are  made  to  carry  a  minimum  pressure  of  80  Ibs.  of 
steam  and  upward.  In  low  pressure  plants  the  minimum 
pressure  necessary  to  obtain  results  may  be  only  two 
or  three  pounds  of  steam,  the  maximum  not  more  than 
ten  pounds.  A  sectional  boiler  is  rarely  or  never  em- 
ployed for  high  pressure  work.  It  is  less  satisfactory, 
although  cheaper  than  the  horizontal  boiler. 

Large  or  small  sizes  of  coal  may  be  used  by  adapting 
the  style  and  size  of  the  grates  to  the  kind  of  coal 
desired.  The  small  sizes  of  coal,  known  as  "steam 
sizes,"  burn  more  rapidly,  and  are  particularly  adapted 
for  high  pressure  plants,  but  require  more  constant 
"firing"  than  the  larger  sizes. 

Hot  Water  Supply — Hot  water  is  obtained  by  the 
installation  of  hot  water  tanks  in  the  boiler  room,  inside 
of  which  tank  a  coil  is  placed,  through  which  steam 
is  passed,  thereby  heating  the  water  in  the  tank ;  a  ther- 
mostat should  be  placed  on  the  tanks  to  control  the  water 
heating  to  the  proper  temperature.  By  the  use  of  sim- 
ilar coils  outside  the  tank,  through  which  the  water 

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Practical  Real  Estate  Methods 

passes  before  it  reaches  the  tank,  the  same  results  are 
obtained.  The  latter  method,  being  a  special  device,  is 
more  expensive  but  more  satisfactory  than  the  former, 
as  steam  coils  inside  a  tank  gradually  "pit"  or  wear, 
and  leak,  and  are  difficult  to  repair.  Hot  water  is  ob- 
tained also  by  the  use  of  hot  water  heaters,  which  are 
small  independent  stoves  which  convey  direct  heat  to 
water  coils  above  them,  and  are  run  independently  of 
the  steam-boiler  plant.  A  combination  of  the  two  meth- 
ods of  obtaining  hot  water  is  very  satisfactory,  as  during 
the  winter  months  the  steam-boiler  is  used  and  furnishes 
the  necessary  hot  water,  without  the  added  expense  of 
running  the  additional  small  heater,  whereas  in  the 
summer  time,  when  the  heating  plant  is  shut  down,  the 
hot  water  heaters  are  used  to  obtain  the  necessary  supply 
of  hot  water.  In  very  large  buildings,  or  where  a  high 
pressure  plant  is  installed,  and  where  power  is  furnished, 
steam  can  be  used  all  the  year  for  supplying  hot  water. 
It  is  important  that  the  hot  water  tank  should  be  suf- 
ficiently large  to  contain  a  surplus  supply  of  water  at 
all  times,  under  even  extraordinary  demand.  The  prob- 
lem of  getting  hot  water  varies  according  to  the  require- 
ments of  the  particular  building  in  which  the  plant  is 
installed. 

Hardware — The  hardware  in  a  house  is  relatively  un- 
important, but  is  an  excellent  indication  of  how  well 
the  house  is  built.  Solid  brass  hardware  costs  consid- 
erably more  than  stamped.  The  difference  between  the 
two  is  easily  detected,  and  the  use  of  the  former  is 
an  indication  of  substantial  construction,  although  the 
reverse  is  not  always  true  of  the  latter. 

Electrical  and  Bell  Work — It  is  difficult  to  determine 
as  to  the  interior  character  of  the  electrical  and  bell  work, 

104 


Points  in  Valuing  Buildings 

but  the  adequacy  of  the  equipment  should  be  considered 
by  noting  the  use  or  omission  of  wall  switches,  base 
plugs,  dresser  outlet  lights,  sufficient  illumination  in  all 
rooms,  and  the  use  of  proper  panel  boards  and  boxes 
in  each  apartment.  It  is  easy  to  detect  whether  paraffine 
or  rubber  covered  wire  has  been  used  for  the  bell  work, 
the  use  of  the  latter  showing  that  the  best  material  pos- 
sible has  been  employed.  The  sufficiency  of  the  equip- 
ment of  bells  and  annunciators,  where  necessary,  should 
be  noted.  The  use  of  a  handsome  and  substantial  push 
button  at  the  entrance  door  is  a  slight  indication  of 
the  care  or  carelessness  used  in  equipping  the  house. 

Plastering — There  is  little  that  one  may  do  to  deter- 
mine the  quality  of  plastering  in  finished  buildings.  The 
use  of  decorative  plaster  work  on  ceilings  may  be  con- 
sidered as  indicating  a  desire  on  the  part  of  the  builder 
to  obtain  a  good  job.  The  use  of  coved  ceilings  through- 
out should  likewise  be  regarded  as  good  practice,  but 
the  layman  finds  it  almost  impossible  to  determine  the 
general  character  of  plaster  work  in  new  buildings,  and 
the  cracking  and  settling  of  plaster  is  due  as  often  to 
faulty  construction  of  masonry,  framing,  etc.,  as  to  a 
poorly  mixed  or  laid  job  of  plastering. 

Shades — The  quality  of  the  shades  in  an  apartment 
is  an  indication  of  good  or  bad  equipment.  A  heavy 
shade  stick  and  strong  cord,  and  a  good  quality  holland, 
indicate  good  work.  A  cheap  shade,  which  is  constantly 
getting  out  of  order,  is  costly  to  maintain.  The  initial 
cost  of  putting  in  a  first-class  shade  is  so  small  in 
comparison  to  the  cheaper  one  that  economy  in  this 
respect  should  not  be  considered  as  against  the  final 
cost  of  maintaining  a  poor  shade. 

The  same  is   true   as   regards   the   other   equipment 

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Practical  Real  Estate  Methods 

necessary  in  apartments,  such  as  dumbwaiters,  refrigera- 
tors, lighting  fixtures,  gas  ranges. 

Dumbwaiter — The  dumbwaiter  rope  should  be  of  the 
best  quality,  and  the  car  should  be  of  oak,  heavily  bound 
with  iron.  A  good  car  for  the  dumbwaiter  can  be  pur- 
chased for  the  ordinary  six-story  house  for  about  $35, 
whereas  a  cheaper  car  at  $25  is  too  often  installed.  The 
expense  of  maintenance  of  one  as  against  the  other  will 
probably  show  in  five  years'  time  that  the  car  which 
was  originally  the  cheaper  is  finally  three  times  as  costly. 

Refrigerator — The  refrigerator  should  be  large  enough 
and  should  be  lined  with  galvanized  iron  heavy  enough 
to  withstand  the  greatest  amount  of  wear.  The  use  of 
imitation  porcelain  lining  instead  of  the  opalescent  white 
glass,  or  white  tile,  is  bad  practice,  as  the  former,  which 
is  cheap  metal  lightly  coated  with  porcelain,  will  rust 
in  a  short  time,  and  become  unsanitary.  The  use  of 
light-weight  glass  is  also  improper,  as  it  becomes  easily 
broken  and  is  therefore  costly  to  maintain.  The  use  of 
heavy  brass  hardware,  both  for  hinges  and  catches,  is 
desirable,  as  the  hardest  kind  of  wear  is  given  them. 

Lighting  Fixtures — Lighting  fixtures  should  be  at- 
tractive, preferably  of  cast  or  spun  metal,  and  should 
be  heavy  enough  to  withstand  the  hard  usage  to  which 
they  are  put.  The  use  of  a  chain  pull  socket  which  is 
easily  reached,  in  place  of  a  key  socket,  is  desirable, 
particularly  where  the  wall  switch  is  not  used  to  control 
the  light.  The  small  additional  cost  of  the  former  will 
be  more  than  made  up  by  the  greater  efficiency  and 
attractiveness  to  tenants,  while  the  cost  of  maintenance 
is  no  greater. 

Bathroom  Hardware — It  is  desirable  to  install  bath- 
room hardware  in  apartments  where  the  walls  are  tiled, 

106 


Points  in  Valuing  Buildings 

such  as  toilet  paper  holders,  towel  racks,  soap  dishes, 
etc.,  so  that  the  various  tenants  will  not  injure  the  tile 
when  installing  and  removing  their  own  fixtures. 

Gas  Ranges — The  use  of  a  good  gas  range  is  desirable, 
as  the  cost  of  maintenance  is  less,  and  its  efficiency 
and  attractiveness  to  the  tenant  affect  the  income  most 
favorably. 

Painting  and  Decorating 

The  painting  and  decorating  of  an  apartment  is  more 
or  less  temporary,  and  owners  are  obliged  to  do  this 
work  every  few  years,  and  the  character  of  it  can  only 
be  considered  from  its  attractiveness  from  the  tenant's 
standpoint,  and  its  durability,  from  the  owner's  stand- 
point. 

The  use  of  a  good  varnish  on  doors  and  the  wood- 
work, which  is  finally  rubbed  to  a  hard  finish,  indicates 
the  use  of  the  best  method  and  gives  the  best  results 
and  greatest  durability.  The  same  is  true  of  enameling. 
Painted  walls  should  be  stippled,  which  makes  them  wear 
and  look  better. 

Hardwood  floors  should  be  rubbed  to  a  dull  finish, 
whether  shellac  or  varnish  is  used.  The  use  of  crude 
oil  on  kitchen  floors  makes  the  most  desirable  and  durable 
finish,  as  varnish  used  on  a  floor  which  is  being  con- 
stantly wet  will  soon  wear  off,  and  is  costly  therefore 
to  maintain. 

Telephones — The  use  of  telephones  in  apartment 
houses  has  become  almost  universal.  In  the  higher  class 
houses,  it  is  particularly  desirable  to  eliminate  the  usual 
switchboard  installation  made  by  the  telephone  companies, 
which  is  very  costly  to  maintain,  both  from  the  necessity 
of  paying  switchboard  operators  and  from  the  loss  in 

107 


Practical  Real  Estate  Methods 

toll  collections  due  to  the  fact  that  five  cents  is  the 
maximum  charge  that  can  be  collected  from  the  tenants 
and  four  cents  the  minimum  cost,  unless  the  total  yearly 
messages  be  exceptionally  large  in  number.  By  com- 
pelling each  tenant  to  make  his  independent  contract 
with  the  company,  it  is  possible  to  do  away  with  the 
necessity  of  maintaining  the  switchboard  and  of  acting 
as  a  collecting  agency  for  the  telephone  company,  which 
is  practically  what  the  owner  of  an  apartment  house  with 
a  switchboard  system  is  obliged  to  do.  As  it  is  necessary 
to  have  some  means  of  communication  from  the  entrance 
hall  to  each  tenant's  apartment  and  also  with  the  janitor, 
superintendent,  etc.,  an  intercommunicating  phone  system 
must  be  installed  which  can  be  done  at  a  comparatively 
moderate  cost,  affording  a  means  of  intercommunication 
within  the  house,  and  at  practically  nominal  cost  for 
maintenance. 

This  method  of  telephone  equipment  has  been  tried 
with  great  success  in  a  number  of  apartment  houses  and 
should  be  considered  a  most  desirable  feature  from  the 
standpoint  of  the  owner. 

Filters — Filters  in  the  larger  apartment  houses  are 
a  desirable  addition,  their  use  being  a  convenience  to 
the  tenant  as  well  as  a  sanitary  precaution.  In  addition 
to  this,  in  twelve-story  houses  they  help  to  eliminate 
dirt  and  other  foreign  matter  from  the  water  supply, 
thereby  insuring  better  circulation  and  less  deposits  in 
the  pipes  and  traps  of  the  plumbing  system  throughout 
the  house.  Filters  are  easy  and  inexpensive  to  maintain 
if  properly  made  and  installed.  A  cheap  filter,  however, 
is  worse  than  useless.  One  criticism  that  can  be  made 
of  the  use  of  a  filter  is  that  it  reduces  the  water  pressure, 
thereby  increasing  the  necessity  for  the  use  of  a  pump, 

108 


Points  in  Valuing  Buildings 

but  in  buildings  over  six  stories  in  height  the  pump  is 
practically  a  necessity.  Therefore,  this  question  may 
be  disregarded  in  buildings  more  than  six  stories  high. 

Note  should  be  taken  of  such  additional  equipment  as 
wall  safes,  which  are  of  little  practical  use,  of  mail  chutes, 
which  are  of  great  convenience  and  cost  nothing  to 
maintain,  of  garbage  closets,  which  find  favor  with  many 
tenants,  but  which  must  be  carefully  and  often  cleaned 
to  be  kept  sanitary. 

Vacuum  Cleaner — A  vacuum  system  in  a  large  apart- 
ment house  is  a  desirable  addition.  Its  cost  of  main- 
tenance may  be  such  as  to  offset  its  attractiveness  from 
the  owner's  standpoint,  but  a  substitute  may  be  found 
in  the  portable  vacuum  cleaners  which  do  equally  good 
work  and  which  are  run  by  power  furnished  by  each 
tenant. 

Lighting  Public  Halls — The  public  halls  should  be 
well  lighted,  but  not  over-lighted,  as  the  latter  are  costly 
to  maintain.  If  too  many  outlets  are  provided,  low 
candlepower  lamps  should  be  used.  The  method  in  which 
these  lights  are  controlled  will  also  effect  economy,  par- 
ticularly the  use  of  a  double  switch  for  each  hall  landing 
light  which  should  properly  have  one  electric  light  of 
high  power  and  one  of  low  power,  the  latter  to  be  used 
whenever  possible. 

Mirrors — Note  should  be  taken  of  the  mirrors  pro- 
vided in  apartments,  as  they  are  attractive  to  tenants 
and  cost  practically  nothing  to  maintain,  as  breakage 
can  be  covered  by  insurance. 

Pumps — Pumps  are  a  necessity  in  many  buildings,  and 
usually  are  placed  in  the  basement,  on  a  solid  foundation, 
as  near  the  water  main  as  possible.  Where  a  large 
amount  of  pumping  is  to  be  done,  a  suction  tank  or 

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Practical  Real  Estate  Methods 

reservoir  of  water,  from  which  the  pump  finds  its  supply, 
is  desirable. 

The  law  compels  the  installing  in  fireproof  apartment 
houses  of  a  water  line  standpipe,  from  cellar  to  roof, 
with  valves,  hose  nozzles,  etc.,  on  each  floor  landing, 
for  use  in  case  of  fire,  and  also  a  "Siamese"  water  con- 
nection on  the  street,  so  that  the  city  fire  engines  may 
find  ready  access  to  the  necessary  water  supply  near 
the  building. 

Basement  Arrangement — The  equipment  and  arrange- 
ment of  the  basement  in  apartment  houses  is  very  im- 
portant. The  boiler  room  should  be  large  and  preferably 
lighted  from  the  street,  and  have  adequate  ventilation. 
The  boilers  should  be  ample  to  heat  the  house  under 
low  pressure,  and  there  should  be  sufficient  room  in 
front  of  the  boiler  to  pull  the  tubes  so  as  to  make  nec- 
essary repairs.  The  use  of  a  thermostat  to  control  hot 
water  heating  is  desirable  where  steam  is  used  for  the 
purpose,  as  it  prevents  the  overheating  of  water  which 
is  detrimental  to  the  piping,  creating  too  much  pressure 
and  corrosion.  Hot  water  tanks  should  be  adequate,  and 
independent  heaters  should  be  likewise  provided  for  heat- 
ing water  when  steam  is  not  used.  A  small  tank  and 
large  heater  will  produce  the  desired  results,  but  a  large 
tank  giving  constant  storage  capacity  of  hot  water  will 
cause  less  consumption  of  coal,  and  is,  therefore,  cheaper 
to  maintain.  Where  pumps  are  necessary  two  pumps 
should  be  provided,  for,  in  the  event  of  one's  breaking, 
the  house  is  left  without  means  of  obtaining  water. 

Coal  Storage — A  large  storage  room  for  coal  is  eco- 
nomical, as  coal  bought  in  large  quantities  is  cheaper. 
The  handling  of  ashes  should  be  carefully  considered, 
as  the  more  readily  they  can  be  taken  out  the  less  the 

no 


Points  in  Valuing  Buildings 

expenditure  both  of  time  and  of  labor.  The  simpler  the 
apparatus  in  use  in  the  boiler  and  pump  rooms  of  an 
apartment  house  the  better,  as  the  ordinary  janitor  or 
superintendent  can  make  repairs  to  the  usual  equipment 
whereas  an  added  expense  is  created  if  the  use  of  outside 
mechanics  is  required.  The  laundry  room  is  a  necessary 
addition  to  all  large  apartment  houses,  and  should  be 
equipped  with  sufficient  driers  for  clothes,  preferably 
run  by  steam  in  winter  and  gas  in  summer.  Washtubs, 
ironing  boards  and  ironing  stoves  are  an  attraction  to 
tenants  and  inexpensive  to  maintain. 

In  summing  up  the  foregoing  memoranda  regarding 
finish  and  equipment,  the  point  intended  to  be  made  plain 
is  that  cost  should  not  be  considered  where  efficiency 
and  economy  can  be  obtained. 


IV— COST 

In  estimating  the  cost  of  a  building,  there  is  no 
accurate  rule  or  method  that  can  be  given.  The  common 
method  is  to  obtain  the  cubic  contents  of  a  building  and 
by  estimating  the  cost  of  the  construction  of  each  par- 
ticular class  of  building  at  so  much  per  cubic  foot,  decide 
the  total  cost  in  this  manner.  It  may  be  readily  seen 
that  the  variation  in  cost  of  buildings  of  the  same  gen- 
eral character  and  construction  may  be  so  great  as  to 
make  this  method  inadequate  and  inaccurate,  but  for  the 
purpose  of  estimating  the  cost  of  improved  property,  it 
is  the  only  available  method.  This  cost  should  not  be 
considered  as  the  true  index  of  value,  but  the  other 
points  enumerated  should  be  carefully  considered. 

in 


Practical  Real  Estate  Methods 

V— RUNNING  COST  AND  MAINTENANCE 

In  considering  the  running  expenses  and  cost  of 
maintenance,  the  foregoing  discussion  of  construction, 
equipment  and  finish  is  the  most  material  point.  In 
addition  to  this,  the  character  of  the  building  must  be 
considered,  the  necessary  service  to  be  maintained,  the 
pay  roll,  etc.  Unnecessary  elevators  add  to  the  cost  of 
maintenance  and  unnecessary  employees  do  likewise. 
Where  a  building  is  so  built  and  finished  as  to  be  classed 
as  a  poor  building  and  badly  equipped,  it  may  be  safely 
estimated  that  the  cost  of  maintenance  will  be  high.  The 
character  of  the  neighborhood,  the  character  of  the 
building  itself,  and  the  character  of  the  tenants  will  also 
influence  the  cost  of  maintenance.  Certain  classes  of 
tenants  depreciate  the  value  of  property  rapidly  by  their 
general  ill-use  of  their  apartments,  whereas  a  higher  class 
property,  with  refined  tenants,  can  be  maintained  for 
a  much  longer  period  at  a  much  less  expense  pro  rata. 

VI— ESTIMATING  INCOME 

In  estimating  the  income  of  an  apartment  house,  there 
are  five  points  that  may  be  considered:  First,  the  light 
and  air;  second,  size  of  rooms;  third,  arrangement  of 
rooms;  fourth,  equipment  of  the  apartments  and  house 
in  general;  fifth,  material  and  workmanship  used  in  the 
building.  These  features  may  be  considered  to  rank  in 
importance  in  the  order  as  put  above.  The  most  im- 
portant thing  to  the  tenant  in  determining  how  much 
rent  he  is  going  to  pay  is  the  light  and  air  in  the  rooms ; 
next,  the  size  of  the  rooms,  and  then  the  arrangement 
of  the  rooms,  AH  things  considered,  if  these  three  points 


Points  in  Valuing  Buildings 

be  favorable,  the  equipment  and  construction  will  count 
for  much  less  to  the  tenant  than  the  former  qualifications. 
But,  as  before  outlined,  these  latter  points  make  a  mate- 
rial difference  in  the  cost  of  maintenance,  particularly 
the  last,  and  it  may  be  readily  seen  that  the  house  which 
brings  $5,000  a  year  income,  with  a  cost  of  $3,000  to 
maintain,  will  return  a  better  net  income  than  the  house 
which  brings  $5,500  a  year,  with  a  cost  of  maintenance 
of  $4,000. 

So  long  as  the  apartment  which  the  tenant  occupies 
presents  a  pleasing  appearance,  so  long  as  he  obtains 
sufficient  heat,  hot  water  service,  etc.,  he  will  not  insist 
on  a  reduction  in  rent  from  what  he  originally  paid. 
But  the  poorly  built  house  will  cost  the  owner  a  great 
deal  more  to  maintain  in  its  original  condition  than  the 
well-built  one  will.  It  should  therefore  be  concluded 
that,  in  estimating  the  value  of  improved  property,  the 
question  of  income  and  expense  should  be  considered 
together  as  part  of  each  other. 

VII— LIGHT  AND  AIR 

In  discussing  light  and  air,  the  size  and  arrangement 
of  rooms  and  general  appearance  of  the  apartment  house, 
we  must  consider  the  architectural  necessities  and  meth- 
ods of  apartment  house  construction.  In  planning  an 
apartment  house,  the  Tenement  House  Department  im- 
poses certain  requirements  as  to  the  size  of  the  yards, 
courts,  etc.  The  sizes  of  these  latter  vary  according  to 
the  size  of  the  building,  being  larger  for  the  higher 
buildings  than  they  are  for  the  lower  ones. 

In  planning  an  apartment  house,  both  architect  and 
builder  are  restricted  by  the  requirements  of  the  Tene- 


Practical  Real  Estate  Methods 

ment  House  Law,  and  also  in  a  measure  by  the  Building 
Code.  The  arrangement  of  apartment  houses  has  often 
been  criticised  when  it  was  impossible  for  the  architect 
to  plan  the  house  differently,  owing  to  restrictions  im- 
posed by  law.  One  of  the  most  common  faults  found 
in  the  matter  of  arrangement  of  rooms  is  having  to 
pass  all  bedrooms  before  one  can  reach  the  living  rooms. 
It  is  obvious  that  where  the  elevator  or  stairs  are  in 
the  middle  of  the  house,  and  with  the  main  entrance 
doors  to  each  apartment  opening  by  necessity  on  the 
public  hall,  a  long  private  hall  must  be  used  so  as  to 
reach  all  the  rooms  in  each  apartment.  In  the  past  it 
has  been  considered  most  desirable  to  place  the  living 
rooms,  parlor  and  dining  room  on  the  street  and  put 
the  less  important  rooms,  such  as  the  kitchen,  bedrooms, 
etc.,  on  the  interior  space  lighted  by  courts  and  shafts. 
Until  recently  this  was  practically  the  universal  way  of 
arranging  an  apartment  house  built  on  an  interior  lot, 
or  of  the  apartments  on  the  interior  parts  of  a  corner 
lot.  During  the  past  few  years,  however,  the  idea  of 
having  the  living  rooms  arranged  as  they  should  be, 
directly  at  the  entrance,  has  come  more  into  vogue,  and 
a  number  of  apartment  houses  have  been  built  with  the 
parlors  and  other  living  rooms  on  the  courts  and  the 
sleeping  rooms  at  the  farther  end  of  the  hall  facing  on 
the  street.  This  innovation  has  proved  most  successful 
and  its  adoption  is  recommended  by  some  of  the  best 
architects  and  builders.  It  has  met  with  marked  ap- 
proval from  the  tenants,  who  prefer  this  proper  and 
logical  arrangement  of  the  rooms  in  their  apartments, 
particularly  as  their  bedrooms  receive  the  benefit  of  the 
light  and  air  from  the  street,  whereas  their  living  rooms, 
which  are  used  more  in  the  evening  than  in  daytime, 

114 


Points  in  Valuing  Buildings 

can  be  artificially  lighted  and  are  not  objectionable  when 
so  situated. 

In  fixing  the  size  of  a  room,  the  architect  is  governed 
entirely  by  the  desires  of  the  builder.  The  size  of  a 
room  is  purely  an  economic  question.  If  a  builder  con- 
structs an  apartment  house  arranged  on  a  plot  of  four 
lots  of  ground  with  only  twenty  rooms  on  a  floor,  he 
will  have  to  obtain  for  these  twenty  rooms  as  much 
rent  as  he  could  get  if  he  were  to  arrange  for  thirty 
rooms  in  the  same  area.  Those  who  desire  large  rooms 
are  therefore  obliged  to  pay  for  them.  A  proper  crit- 
icism can  be  made,  however,  that  up  to  a  short  time 
ago  only  a  few  apartment  houses  were  built  of  proper 
size  for  those  who  were  willing  to  pay  for  them.  The 
same  criticism  may  be  made  as  to  the  number  of  maids* 
rooms  and  the  size  of  the  kitchens  in  many  of  our  finer 
apartment  houses,  where  tenants  find  their  apartment 
woefully  lacking  in  adequate  provision  in  these  regards. 
The  number  of  bathrooms  that  should  be  installed  in 
an  apartment  house  of  high  class  is  also  a  matter  much 
discussed,  and  the  desire  for  a  number  of  bathrooms  in 
apartments  whose  rooms  are  large  in  size  and  number 
is  constantly  increasing.  There  have  been  several  apart- 
ment houses  built  lately  where  a  ten-room  apartment 
has  been  provided  with  four  baths. 

In  the  arranging  of  the  rooms  of  apartment  houses, 
wall  space  must  be  considered,  also  the  way  a  door  should 
be  placed,  and  how  it  should  be  swung.  Ample  closet 
room  should  be  supplied.  No  closet  should  be  less  than 
twenty-two  inches  in  depth,  actual  finished  measurement, 
which  size  will  admit  of  hanging  clothes  on  hangers. 
One  or  two  deeper  closets  are  particularly  desirable. 

The  placing  of  windows  in  rooms  must  also  be  con- 

"5 


Practical  Real  Estate  Methods 

sidered  both  from  the  interior  effect  upon  the  wall  space 
and  from  the  exterior  effect  upon  the  facade.  The  use 
of  bay  windows  is  desirable,  but  is  prohibited  by  law, 
as  an  encroachment  upon  the  street  or  upon  the  courts. 

The  arranging  of  plumbing  fixtures  must  also  be  con- 
sidered both  from  the  standpoint  of  economy  in  building 
and  in  their  proper  position  for  practical  use.  In  tene- 
ment houses,  the  kitchen  is  practically  the  dining  room, 
and  this  room  should  be  made  a  large  room  in  preference 
to  the  so-called  parlor,  which  is  often  used  for  a  sleeping 
room. 

The  exterior  design  of  an  apartment  house  will  mate- 
rially affect  its  income  either  favorably  or  unfavorably, 
according  to  its  attractiveness  or  the  opposite.  The 
architect  is  often  obliged  to  restrain  his  artistic  desires 
by  the  instruction  of  the  builder  to  keep  the  cost  of 
construction  down,  but  neither  a  short-sighted  policy 
of  too  cheap  and  unattractive  a  front  should  be  adopted, 
nor  the  equally  poor  one  of  a  very  expensive  facade, 
or  entrance,  which,  however  attractive,  will  not  have  its 
extreme  cost  compensated  for  by  its  additional  power 
to  attract  tenants. 

To  sum  up,  the  architect  is,  in  a  large  measure,  sub- 
servient, first  to  the  desires  of  the  builder,  and  secondly 
to  the  size  and  shape  of  the  plot  on  which  the  apartment 
house  is  to  be  erected.  Some  plots  lend  themselves 
readily  to  an  excellent  arrangement  of  the  rooms  with- 
out much  difficulty,  while  others  present  such  problems 
as  to  make  it  almost  impossible  to  obtain  a  satisfactory 
arrangement.  When  all  things  are  considered,  the  art 
of  planning  an  apartment  house  has  improved  mate- 
rially, and,  while  there  is  great  room  for  further  advance, 
some  of  the  buildings  constructed  within  the  past  few 

116 


Points  in  Valuing  Buildings 

years  have  been  remarkably  successful,  due  to  the  ex- 
cellent way  they  have  been  planned  and  arranged. 

VIII— CHARACTER  OF  LOCATION 

The  character  of  the  location  materially  influences  the 
character  of  the  building  that  should  be  erected.  In 
valuing  improved  property,  a  location  which  is  unques- 
tionably desirable  for  an  apartment  house  may  be  valued 
liberally,  particularly  where  the  probable  future  develop- 
ment of  the  immediate  vicinity  will  aid  in  increasing 
the  value  of  the  property.  The  same  is  true  in  valuing 
property  for  any  other  improvement  purpose;  the  more 
desirable  the  location,  the  stronger  the  value.  In  es- 
timating the  value  of  improved  property  in  poor  loca- 
tions, either  where  the  character  of  the  improvement 
itself  is  low  class  or  where  the  location  demands  a 
cheap  improvement,  the  values  are  not  so  stable  and, 
the  probability  of  future  decrease  in  value  and  in  de- 
preciation of  the  improvement  itself,  must  necessarily 
influence  one  to  a  conservative  view  of  the  value. 

IX— SUITABILITY 

In  considering  the  suitability  of  the  improvement  for 
the  site,  it  is  necessary  only  to  repeat  what  has  been 
mentioned  in  the  two  articles  relating  to  mortgage 
loans.  To  obtain  the  full  value  of  the  land  the  improve- 
ment of  a  site  must  be  of  a  character  that  is  suitable. 
No  better  illustration  of  this  can  be  cited  than  in  the 
fact  that  wherever  it  is  found  that  a  site  is  suitable  and 
available  for  an  apartment  house  of  twelve  stories  in 
height,  the  land  value  has  materially  increased.  If  the 
purchaser  of  such  a  site  should  restrict  his  improvement 

117 


Practical  Real  Estate  Methods 

to  a  six-story  building,  he  would  find  that  the  property 
as  an  investment  would  not  pay  an  adequate  return,  due 
to  the  excessive  price '  of  the  land.  In  other  words, 
property  is  worth  a  good  deal  more  if  it  is  suitably 
improved  than  if  it  is  not. 

Some  of  the  greatest  changes  in  land  values  in  New 
York  have  been  due  to  the  foresight  of  those  who  have 
discovered  that  some  particular  locality  is  suitable  for 
an  improvement  of  a  character  not  before  considered 
suitable  and  of  such  high  class  as  to  increase  materially 
the  land  value  for  this  particular  character  of  improve- 
ment. The  effect  upon  the  land  values  of  adjacent  prop- 
erty is  at  once  felt,  and  entire  localities  have  been  rebuilt 
in  a  short  time  in  different  sections  of  this  city,  the 
price  of  the  land  rising  to  meet  the  new  level  of  value 
established  by  the  new  character  of  improvement  which 
had  been  demonstrated  to  be  suitable  for  the  locality. 
It  is,  therefore,  most  important  in  valuing  property  to 
see  to  it  that  the  improvement  is  suitable  to  the  character 
of  the  location,  and  if  it  is  not,  the  land  value  must 
be  considerably  discounted. 


118 


THE  STANDARDIZING  OF  REAL 
ESTATE  VALUATIONS 

IRVING  RULAND 

When  Appraisers  Disagree — Need  for  Exact  Ap- 
praisals— Neighborhood  Experts  Best  Qualified — 
Peculiar  District  Conditions  Affecting  Values — Cen- 
tral Appraisal  Committees 

THE  fact  that  leading  appraisers  not  infrequently 
differ  in  their  valuations  of  property  by  as  much 
as  50%,  raises  a  doubt  as  to  the  soundness  of 
the  appraisals,  not  only  of  these  men,  but  also*  as  a 
consequence,  of  the  appraisals  of  men  less  prominently 
known  in  the  profession.    The  demand  is  for  valuations 
which  shall  be,  in  all  cases,  approximately  exact;  for 
the  establishment  of  some  official  body  of  high  character, 
so  composed  that  it  shall  be  qualified  to  make  exact 
appraisals. 

It  is  generally  accepted  that  value  of  real  estate  rests 
on  two  fundamental  factors,  namely,  income  capacity, 
and  the  certainty  that  the  income  will  continue.  To 
be  able  to  decide  rightly  as  to  whether  the  income  ca- 
pacity of  a  property  is  increasing  or  decreasing,  or  is 
becoming  more  or  less  secure;  to  analyze  clearly  the 
causes  producing  these  changes,  and  to  conclude  correctly 
as  to  the  stability  of  such  causes,  one  must  have  intel- 
ligence supplemented  by  experience  in  real  estate  mat- 
ters. Especially  one  must  have  the  intimate  knowledge 

119 


Practical  Real  Estate  Methods 

concerning  a  property  and  its  surroundings  which  only 
a  prolonged  and  careful  study  of  them  can  give.  This 
special  knowledge  is  obviously  more  within  the  reach 
of  a  man  actively  engaged  in  the  real  estate  business 
in  the  particular  section  where  the  property  lies  than 
of  anyone  else. 

It  is  undoubtedly  true  that  an  experienced  real  estate 
man  is  qualified  in  a  measure  to  estimate  values  in  sec- 
tions not  familiar  to  him  by  outward  signs  and  general 
conditions,  and  by  the  aid  of  such  records  of  sales  and 
mortgages  as  are  available  (data  indicating  what  some- 
one else,  rightly  or  wrongly,  estimates  the  value  of 
property  in  that  neighborhood  to  be).  But  such  a  valua- 
tion is,  at  best,  only  a  skilful  guess  when  compared 
to  the  valuation  given  by  a  man  of  equal  experience 
and  integrity  who  has  the  intimate  acquaintance  that 
specializing  in  a  particular  neighborhood  gives. 

New  York  is  a  vast  complex  city  of  dwellings,  factories 
and  houses  of  commerce.  Its  physical  restrictions  neces- 
sitate its  development  along  unique  lines;  its  popula- 
tion is  more  diverse  than  that  of  any  other  city  in 
the  world.  All  of  these  elements  add  to  the  difficulty 
of  the  general  appraiser,  and  emphasize  the  necessity 
for  special  knowledge.  As  one  studies  the  city  it  falls 
naturally  into  sub-divisions  that  are  fairly  homogeneous — 
the  financial  district,  the  dry  goods  district,  the  whole- 
sale grocery  district,  the  lower  East  Side  tenement  dis- 
trict, and  so  on.  In  each  district  the  requirements  of 
the  tenants  are  of  a  certain  kind;  the  rents  that  can  be 
paid  have  certain  limits;  the  leases  date  from  fixed 
months.  Changes  are  constantly  taking  place;  some  ob- 
vious to  all,  others  subtle  and  apparent  only  to  the  careful 
observer.  To  have  an  intimate  knowledge  of  the  con- 

120 


\ 

Standardizing  Valuations 

ditions  and  changes  in  a  district  a  real  estate  man  must 
specialize  in  that  district.  This  man,  therefore,  by  the 
very  nature  of  his  business  has  greater  opportunities 
than  anyone  else  to  acquire  special  knowledge  of  values 
in  his  district. 

Besides  special  knowledge,  character  and  judgment  are 
of  the  highest  importance.  If,  therefore,  there  were 
established  a  central  body  known  to  be  composed  only 
of  men  of  high  .character,  whose  membership  included 
the  leading  specialists  in  the  city,  it  should  be  com- 
petent to  issue  appraisals  that  would  be  accepted  as 
standard,  because  they  would  express  both  special  knowl- 
edge and  high  character.  In  the  Board  of  Brokers  of 
New  York  City,  this  combination,  so  far  as  it  is  humanly 
possible,  has  been  brought  about.  From  the  members 
of  this  Board,  an  Appraisal  Committee  has  been  selected 
with  special  reference  to  the  qualifications  of  the  dif- 
ferent men  upon  it  in  respect  to  character,  judgment 
and  special  knowledge  of  different  sections.  Valuations 
are  given  by  the  men  in  whose  district  the  property  to 
be  appraised  lies.  Their  joint  opinion,  checked,  if  nec- 
essary, by  the  chairman  or  vice-chairman  of  the  Com- 
mittee, or  the  whole  Committee  in  consultation,  con- 
stitutes an  appraisal  by  the  Real  Estate  Board  of  Brokers. 
The  birth  of  the  movement  toward  an  appraisal  com- 
mittee of  this  character  is  recent,  and  its  development 
necessarily  slow.  But,  in  my  judgment,  it  represents 
the  most  reliable  method  available  for  standardizing 
appraisals  of  real  estate  in  this  city. 


121 


HOW  PROPERTY  IS  CONDEMNED 

JOHN  H.  HALLOCK 

Sovereign  Power — What  Is  Private  Property — Con- 
demnation for  Parks  and  Public  Places — Assess- 
ments— Increased  Valuations — Water  Front — School 
Sites — Street  Improvements — Hardships  for  Owners 
—How  Experts  Work 

UNDER  the  old  feudal  system  in  vogue  in  England 
from  the  time  of  William  the  Conqueror,  all  land 
was  owned  by  the  crown  or  the  sovereign.  Their 
subjects  had  the  use  of  this  land  as  a  grant  in  return 
for  the  services  rendered  by  them.  Such  great  abuses 
grew  from  this  ownership  that  in  1215,  at  Runnymede, 
the  subjects  of  King  John  forced  upon  him  the  execution 
of  the  Magna  Charta,  which  provided  that  the  land  of 
subjects  could  not  be  taken  from  them  without  just 
compensation.  Here  the  first  limitation  was  placed  over 
the  sovereign  power.  This  provision  is  recognized  and 
followed  in  most  constitutions  since  that  time. 

From  this  limitation  sprang  various  rules  and  pro- 
cedures which  are  followed  in  acquiring  title  to  private 
property  for  public  uses  or  utilities. 

The  inherent  sovereign  power  is  held  by  the  people 
or  government  over  estates  or  private  property  of  in- 
dividuals to  take  back  or  appropriate  the  same  for  public 
uses  and  for  public  uses  only,  and  may  take  the  same 
without  reference  to  the  burden  imposed  on  any  one 
else.  In  the  United  States  the  right  can  be  exercised 
either  by  a  State  or  the  Federal  Government.  The  Legis- 

122 


How  Property  is  Condemned 

lature  has  the  power  to  decide  whether  the  property 
shall  be  taken  for  public  purposes,  but  not  to  take  it 
from  one  man  for  public  uses  and  then  transfer  it  to 
another.  It  is  not  necessary  for  the  power  to  be  used 
for  the  benefit  of  a  whole  community.  It  can  be  exer- 
cised if  a  great  number  of  inhabitants  are  to  be  benefited. 
The  mode  of  exercising  this  power  is  regulated  by  con- 
stitutional provisions  and  by  statutes.  The  whole  right 
is  controlled  by  constitutional  amendments  to  Article  V 
of  the  Constitution  of  the  United  States  as  follows: 
"Nor  shall  private  property  be  taken  for  public  use 
without  just  compensation."  This  same  right  is  recog- 
nized generally  by  all  civilized  nations. 

What  Is  Property? 

One  must  be  careful  to  understand  properly  the  mean- 
ing of  the  word  "property" ;  for  property  itself  is  nothing 
more  than  the  right  to  own,  enjoy  and  dispose  of,  which 
also  includes  the  use;  in  fact,  it  is  nothing  more  than 
a  bundle  of  rights,  to  be  handled  in  any  way  one  sees 
fit,  and  used  without  curtesy  or  permission  of  any  one, 
and  may  be  disposed  of  after  the  death  of  the  owner 
in  the  way  he  may  have  wished  or  specified. 

Public  Parks  and  Public  Places 

Land  required  for  public  parks  is  acquired  in  New  York 
in  much  the  same  way  as  streets.  First,  there  is  a 
demand  in  the  section  for  the  improvement.  Next,  the 
petition  is  presented  to  the  Local  Board,  and  then  to  the 
Board  of  Estimate  and  Apportionment  for  the  lay-out. 
It  is  then  returned  to  the  Local  Board  for  the  purpose 
of  acquiring  title  and  then  back  again  to  the  Board  of 

123 


Practical  Real  Estate  Methods 

Estimate   and   Apportionment   and   direct   to   the   Cor- 
poration Counsel  to  begin  the  proceeding. 

It  is  not  necessary  to  present  the  matter  to  the  Local 
Board  at  all.  The  matter  may  be  brought  directly  to 
the  Board  of  Estimate  and  Apportionment  which  lias  the 
power  to  initiate  the  proceeding. 

Assessments 

The  present  policy  of  the  Board  of  Estimate  in  the 
matter  of  acquiring  title  to  property  for  public  parks, 
and  public  places  which  increase  the  street  area,  is  for 
the  City  to  bear  half  the  cost  and  the  other  half  is  assessed 
upon  the  property  benefited.  This  has  had  a  depressing 
effect  upon  that  part  of  the  public  who  believe  that  every 
man  should  have  a  public  park  in  front  of  his  house. 
But  now,  when  it  comes  to  paying  for  the  improvement, 
the  owners  whose  properties  are  assessed  with  half  the 
cost  of  the  improvement  usually  object  vigorously.  Here- 
tofore, the  entire  cost  was  borne  by  the  City  of  New 
York  and  public  parks  were  always  in  demand,  but 
under  the  new  policy  of  the  Local  Board,  the  entire 
situation  has  changed. 

An  amendment  to  the  present  system  of  acquiring 
property  has  been  suggested  by  some  able  minds.  They 
suggest  that  the  City  not  only  take  the  property  which  is 
actually  required  for  the  improvement,  but  also  all  the 
property  that  is  deemed  to  be  benefited  thereby.  For  in- 
stance, if  a  very  large  plaza  or  public  place  is  required  by 
the  City,  the  value  of  the  surrounding  property  may  be 
tremendously  increased.  The  plan  is  to  acquire  this 
property  also  and  let  the  City  sell  it  at  public  sale,  and 
reap  the  benefits  of  its  improvements.  Those  opposed 

124 


How  Property  is  Condemned 

to  the  plan  claim  that  the  City  is  reimbursed  through 
increased  taxation.  Nothing  has  ever  been  done  on 
this  line.  It  is  simply  a  suggestion,  but  some  day  some- 
thing of  this  kind  will  be  adopted. 

Docks  and  Bridges 

Water  fronts  required  for  use  by  the  City  of  New 
York  are  acquired  as  follows :  The  Commissioner  of 
Docks,  under  Section  822  of  the  Charter,  is  empowered, 
with  the  Commissioners  of  the  Sinking  Fund,  to  desig- 
nate and  acquire  title  to  docks,  water  fronts  and  all 
wharf  property  for  the  needs  of  the  city.  He  is  also 
empowered  to  purchase  at  private  sale  any  of  the  prop- 
erties required,  and  if  this  cannot  be  done,  to  institute 
the  usual  proceedings  to  acquire  same  in  condemnation. 

When  there  is  a  public  necessity  for  a  bridge  im- 
provement, the  Commissioner  of  Bridges  designates  the 
property  to  be  acquired.  Then,  with  the  recommenda- 
tion of  the  Board  of  Estimate  and  Apportionment,  the 
Commissioners  are  appointed  in  the  same  way. 

School  Sites 

A  complaint  is  made  to  the  local  school  board  in  any 
district,  on  account  of  lack  of  room  and  accommodation, 
and  of  not  taking  care  of  the  children  of  the  district. 
This  board  reports  to  the  Board  of  Education  the  over- 
crowded condition,  and  recommends  that  the  present 
site  be  enlarged  or  some  other  be  selected.  The  Board 
of  Education  adopts  a  resolution  requesting  the  Board 
of  Estimate  to  acquire  the  parcel  for  school  purposes. 
The  Board  of  Estimate  either  authorizes  the  purchase  of 
the  property  at  private  sale  or  directs  the  Corporation 
Counsel  to  commence  condemnation  proceedings,  to  secure 

125 


Practical  Real  Estate  Methods 

the  property.  The  Corporation  Counsel  then  advertises 
for  ten  days  in  the  City  Record  and  some  other  papers 
that  on  a  certain  day  he  will  apply  to  the  Supreme 
Court  for  the  appointment  of  three  disinterested  citizens 
as  Commissioners  of  Estimate  and  Appraisal.  After 
they  are  appointed,  the  Corporation  Counsel  advertises 
for  another  ten  days  that  on  a  certain  day  the  Com- 
missioners will  appear  in  Court  to  qualify.  After  they 
have  qualified,  they  examine  the  property  and  arrange 
a  date  between  the  owner's  attorney  and  the  Corporation 
Counsel  for  the  first  hearing. 

The  owner  has  the  right  to  open  and  close  the  case. 

The  owner  immediately  proves  his  titles  and,  if  there 
are  mortgages  on  the  property,  the  owner  of  the  same 
proves  his  ownership  of  them.  The  owner,  through 
his  experts,  proves  the  value  of  the  property,  and  the 
Corporation  Counsel  then  proves  his  valuation.  After 
the  Commissioners  have  gone  into  the  case  thoroughly, 
they  make  a  preliminary  report  of  value. 

If  the  report  is  not  satisfactory  to  the  owner,  he  files 
objections  to  the  report  and  is  again  heard  by  the 
Commissioners.  If  they  deem  it  proper,  they  may  in- 
crease the  award.  The  motion  to  confirm  the  report 
is  then  advertised  by  the  Corporation  Counsel.  The 
Court  then  confirms  the  report,  and  the  Comptroller 
pays  the  amount  of  the  award. 

Street  Improvements 

Under  the  form  of  local  government  provided  by  the 
Greater  New  York  Charter,  a  local  board  is  authorized 
to  initiate  proceedings  for  the  opening,  closing,  straight- 
ening, paving,  sewering,  flagging,  curbing,  regulating  and 
grading  of  streets  that  lie  within  its  district. 

126 


How  Property  is  Condemned 

The  local  board  is  composed  of  the  aldermanic  district 
in  which  the  local  board  is  situated,  together  with  the 
president  of  the  borough.  If  the  property  affected  lies 
in  more  than  one  aldermanic  district  in  the  same  bor- 
ough, all  the  aldermen  of  the  districts  and  the  president 
of  the  borough  compose  the  local  board.  If  an  improve- 
ment is  required  within  a  certain  district,  the  local  board 
of  this  district  adopts  a  resolution  recommending  the 
improvement  to  the  Board  of  Estimate  and  Apportion- 
ment. 

Street  openings  are  begun  as  follows: 

The  local  board  adopts  a  resolution  to  lay  out  a  certain 
street,  or  to  sewer,  pave,  regulate,  grade  or  change  the 
grade  of  a  certain  street.  This  resolution  is  sent  to 
the  Board  of  Estimate  and  Apportionment.  The  Board 
of  Estimate  and  Apportionment,  if  it  approves  the  reso- 
lution, makes  its  resolution,  laying  out  the  street  or 
the  improvement  as  designated  by  the  local  board,  or 
modifying  it,  as  it  deems  proper.  The  matter  again 
comes  up  before  the  local  board,  which  adopts  a  res- 
olution recommending  that  title  to  the  improvement 
be  acquired  by  the  City  of  New  York.  This  matter  is 
then  again  presented  to  the  Board  of  Estimate  and 
Apportionment,  which  lays  out  an  area  of  assessment  on 
which  the  cost  of  the  improvement  is  assessed.  Public 
hearings  are  given  for  this  purpose.  Notice  of  this 
hearing  is  published  in  the  City  Record  and  other  cor- 
poration newspapers  for  a  specified  time,  setting  forth 
a  date  when  the  Board  of  Estimate  will  again  consider 
the  matter.  At  this  hearing  an  area  of  assessment  is 
fixed,  and  the  Corporation  Counsel  then  makes  applica- 
tion for  the  appointment  of  Commissioners  of  Estimate 
and  Assessment. 

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Practical  Real  Estate  Methods 

All  of  the  Commissioners  must  reside  within  the 
borough  in  which  the  property  affected  lies. 

Formerly  all  of  the  Commissioners  sat  as  Commission- 
ers of  Estimate  and  Assessment;  but  now  two  act  as 
Commissioners  of  Estimate  and  one  as  Commissioner 
of  Assessment.  These  are  designated  by  the  Court  who 
makes  the  appointment.  Formerly  the  compensation  of 
the  Commissioners  for  one  hearing  was  $10,  but  now 
it  has  been  reduced  to  $5,  and  they  are  obliged  to  sit 
at  least  one  hour  at  each  hearing.  After  they  are  ap- 
pointed by  the  Court,  they  give  notice  to  the  persons 
whose  property  is  affected  to  file  their  appearances  and 
claims,  and  that  the  Commissioners  will  conduct  a  hearing 
on  a  date  set.  On  or  before  that  time  owners  can  present 
their  appearances  and  claims  in  writing  to  the  Clerk  of 
the  Commissioners. 

Proving  Title  and  Value 

Then  the  matter  of  proving  titles  to  the  various  par- 
cels affected  is  taken  up.  Formerly  titles  were  proved 
before  the  Commissioners,  but  this  was  too  expensive 
to  the  city,  and  in  order  to  reduce  the  cost  of  these 
proceedings  and  the  number  of  hearings  before  the 
Commissioners,  it  was  determined  that  titles  be  proved 
before  the  Corporation  Counsel.  Therefore,  the  question 
of  title  does  not  come  before  the  Commissioners  at  all, 
unless  a  point  is  raised  by  the  Corporation  Counsel. 

The  owners  then  prove  value  and  their  witnesses  are 
submitted  to  the  cross-examination  of  the  City  and  by 
the  attorneys  for  the  owners.  Both  sides  sum  up  and 
the  proceeding  closes.  Notice  of  the  preliminary  report 
of  the  Commissioners  is  given  by  publication.  If  any 

128 


How  Property  is  Condemned 

objections  are  found  by  the  owners  to  the  preliminary 
report,  they  are  submitted  in  writing  and  filed.  Objec- 
tions are  heard  before  the  Commissioners.  The  final 
report  is  then  made  and  notice  that  the  final  report  will 
be  presented  for  confirmation  is  published,  at  which 
time  title  to  the  property  affected  vests  in  the  City  of 
New  York. 

Hardship  for  Owners 

rAs  soon  as  a  site  for  any  improvements  has  been 
selected,  the  newspapers  get  the  news  and  it  is  pub- 
lished broadcast  that  on  or  before  a  certain  day  the 
City  will  erect  on  a  certain  location  a  fire  house  or  a 
school  or  a  police  station,  a  bridge  approach,  or  will  tear 
down  the  buildings  and  develop  the  location  into  a  park. 
The  tenants  see  the  plans  clearly  and  immediately  seek 
other  quarters,  fearing  they  may  be  turned  out  at  any 
time.  This  is  the  time  for  the  small  boy  and  thief. 
The  small  boy  thinks  that  the  property  is  his,  and  that 
broken  windows  are  expected  of  him  or  he  is  not  living 
up  to  his  reputation  in  the  neighborhood.  He  lives  up 
to  his  reputation  all  right.  The  thief  then  gets  in  his 
high  art  and  removes  not  too  carefully  all  gas  fixtures, 
copper  boilers,  and  lead  piping,  and  the  owner,  in  despair, 
begs  the  last  remaining  tenant  to  remain,  rent  free,  to 
keep  the  neighborhood  trom  using  what  is  left  of  the 
building  for  firewood.  The  building  is  now  a  wreck,  and 
nothing  like  it  was  a  short  time  ago. 

City  Photographer 

The  City  again  treats  its  citizens  in  a  most  magnani- 
mous way  by  sending  the  photographer  around  to  get 

129 


Practical  Real  Estate  Methods 
i 

a  picture,  and  he  gets  a  good  one,  and,  in  fact,  only 
too  good,  for  when  testimony  is  taken,  sometimes  many 
months  after,  the  owner  is  confronted  with  a  fine  picture 
of  his  property  in  a  most  dilapidated  shape,  and  unless 
the  owner  had  the  foresight  to  have  a  photograph  taken 
at  the  time  the  property  was  selected,  the  impression 
made  by  the  City's  photograph  is  very  bad.  Why  not 
treat  the  owner  fairly  and  reimburse  him  in  a  proper 
manner  after  taking  his  property  and  depriving  him  of 
his  income?  Give  him  a  proper  amount  for  his  property 
and  give  him  the  satisfaction  of  knowing  that  he  belongs 
to  a  city  whose  property  holders  are  treated  in  a  fair 
manner. 

Expert  Modes  of  Procedure 

The  first  thing  an  expert  does  after  being  retained 
is  to  examine  the  property  in  question  very  carefully. 
He  examines  each  and  every  building  from  cellar  to  roof 
— first  as  to  its  general  condition  of  repair ;  then  as  to  the 
number  of  apartments  and  stores,  if  any,  and  the  number 
of  rooms  in  each  apartment.  He  draws  a  diagram  of 
each  floor,  showing  location  of  all  the  improvements 
and  the  staircases,  examines  the  kind  of  roof,  and  also 
the  cellar,  as  to  whether  concreted,  flagged  or  what, 
and  familiarizes  himself  with  every  detail,  so  that  he  can 
be  asked  any  question  regarding  it.  Then  he  ascertains 
whether  the  property  in  question  is  a  key,  or  has  a 
controlling  influence  over  the  adjoining  property.  For 
instance,  it  may  be  next  to  a  corner  and  partake  of 
the  value  of  the  corner,  and  might  absolutely  control 
the  same.  As  the  next  step,  he  proves  the  value  of  the 
land  by  actual  sales  he  has  made  in  the  neighborhood, 
or  that  have  been  made,  so  that  he  can  substantiate  his 

130 


How  Property  is  Condemned 

valuation  as  being  the  actual  market  value  at  the  time 
title  vested  in  the  City. 


Plottage 

If  it  is  a  plot  25x100  up  to  50x100  and  has  no  im- 
provements in  the  line  of  buildings  that,  if  occupied, 
will  yield  an  income  sufficient  as  a  carrying  value,  5% 
of  the  market  value  is  added  as  plottage,  and  the  building 
or  improvement  loses  its  identity.  If  the  same  con- 
ditions prevail  with  a  plot  50  feet  front  by  100  feet  in 
depth,  or  more,  and  the  building  or  buildings  are  not 
an  adequate  improvement,  the  buildings  entirely  lose 
their  value,  and  10%  of  the  market  value  of  the  entire 
plot  is  added  as  plottage.  But  if  the  buildings  are  an 
adequate  improvement,  then  he  proves  the  value  of  the 
plot  of  ground,  either  one  lot  or  more,  and  the  buildings 
add  so  much  to  the  value  of  the  land. 


Value  by  Sales 

In  stating  the  amount  of  damages  in  the  proceedings 
the  entire  amount  must  be  given,  then  the  value  of  the 
land  and  then  the  value  of  the  improvements.  As  I  have 
said  before,  the  expert  proves  his  values  by  recent  sales, 
and  he  should  be  careful  to  enumerate  the  most  advan- 
tageous sales  that  have  been  made;  for  the  Corporation 
Counsel  takes  the  expert  in  hand  and  endeavors  to  tear 
his  testimony  limb  from  limb.  He  will  have  a  list  before 
him  of  all  sales  that  have  been  forced  through  fore- 
closure or  partition,  and  also  where  heirs  have  been 
compelled  to  sell  their  undivided  interests,  etc.,  and,  in 
fact,  he  will  do  everything  to  discredit  the  testimony 


Practical  Real  Estate  Methods 

of  the  expert.  If  he  has  testified  in  any  previous  pro- 
ceeding, the  testimony  given  at  that  time  will  be  taken 
up  to  show  that  he  may  have  altered  his  theory  since 
testifying  before,  although  ten  years  may  have  elapsed 
and  conditions  all  have  changed.  Then  the  expert  for 
the  City  takes  the  witness  chair  and  of  course  endeavors 
to  prove  the  value  of  the  said  property,  and  will  say 
the  value  is  several  thousand  dollars  lower  than  the 
amount  the  expert  for  the  owner  has  already  testified 
to,  and  uses  as  a  basis  the  sales  that  the  Corporation 
Counsel  has  used,  and  which  were  furnished  by  the 
City's  expert.  He  is  then  cross-examined  by  the  owner's 
attorney,  and  after  arguments  by  both  attorneys  the  case 
is  closed  and  the  Commissioners  take  the  entire  case 
under  consideration  and  make  their  awards. 

Value  of  Remainder 

Certain  property  taken  through  condemnation  may  be 
only  a  portion  of  a  large  tract  of  land.  If  a  considerable 
amount  is  taken  the  owner  may  be  entitled  to  con- 
sequential damages,  owing  to  the  fact  that  the  remainder 
of  the  plot  would  be  too  small  for  adequate  improvement 
which  would  yield  a  proper  income.  The  valuation  is 
made  as  of  the  date  the  title  vested  in  the  City;  and 
although  the  remainder  may  greatly  increase  in  value 
in  the  very  near  future  on  account  of  the  contemplated 
improvement,  this  must  not  affect  the  award  for  the 
property  taken.  The  remainder  may  become  a  corner 
or  a  key  to  a  corner,  or  a  controlling  factor  of  a  corner. 
It  may  also  immediately  adjoin  an  entrance  to  a  bridge 
where  traffic  would  be  multiplied  many  hundreds  of  times, 
and  where  a  building  could  be  erected  that  would  pro- 

132 


How  Property  is  Condemned 

duce  enormous  rentals.     Still  this  has  no  bearing  on 
the  original  award. 


Why  Experts  Object  to  Testifying 

The  objection  most  real  estate  experts  have  against 
appearing  in  proceedings  of  condemnation  is  the  fact 
that  they  consume  so  much  time  that  the  pay  is  not 
sufficient  to  reimburse  them.  For  instance,  an  expert 
is  requested  to  value  a  piece  of  real  estate,  with  an 
idea  of  appearing  in  a  proceeding.  He  agrees  with 
the  attorney  as  to  terms  and  gets  ready.  After  getting 
his  figures  and  all  the  data  he  requires,  consultations 
are  held.  The  time  of  first  hearing  is  arranged.  He 
attends  meetings  and  finds  that  only  two  commissioners 
have  appeared  and  that  the  attorney  representing  the 
owner  will  not  proceed  unless  the  entire  commission 
is  at  the  first  hearing  when  experts  are  qualified.  This 
means  an  adjournment,  and  another  date  is  arranged. 
This  time  the  Corporation  Counsel  is  unable  to  be 
present  and  another  date  is  fixed,  and  so  it  goes.  Finally 
he  is  heard  on  his  direct  examination,  and  then  more 
adjournments  are  taken.  Next  he  learns  that  the  damage 
map  is  incorrect,  and  a  new  map  is  furnished  by  the 
clerk  of  the  department  and  the  surveyor  is  placed  on 
the  stand  to  verify  the  correctness  of  the  new  map. 
This  done,  the  Corporation  Counsel  moves  that  the  direct 
testimony  already  given  be  stricken  from  the  records, 
as  the  map  was  not  correct  and  the  figures  were  all 
wrong.  After  his  figures  are  all  corrected,  the  expert 
then  undergoes  his  direct  examination.  The  Corpora- 
tion Counsel  commences  the  cross-examination.  These 
delays  have  consumed  two  or  three  months  and  15  or 

133 


Practical  Real  Estate  Methods 

20  adjournments,  so  that  for  his  expert  services  he 
receives  a  very  small  fee,  probably  at  the  end  of  a 
year,  and  in  some  cases  two  or  three  years,  for  he  has 
entered  into  an  agreement  with  the  attorney  representing 
the  owner  to  receive  his  money  after  the  award  has 
been  paid. 

Abuses  of  Condemnation 

Hon.  Herman  A.  Metz,  Comptroller  of  the  City  of 
New  York,  on  January  31,  1908,  sent  a  communication 
to  the  Hon.  Charles  E.  Hughes,  Governor  of  the  State 
of  New  York,  setting  forth  the  unjustifiable  squandering 
of  enormous  amounts  of  money  through  condemnation 
proceedings,  and  quoted  many  instances.  In  1907*  Com- 
missioners made  awards  of  $6,598,672.20  for  property 
for  public  uses  other  than  street  openings  and  $6,934,- 
063.34  for  street  openings.  The  total  was  $13,532,736.14. 
The  Comptroller  purchased  at  private  sale  property  to 
an  amount  of  $6,353,099.78  as  authorized  by  a  resolution 
of  the  Board  of  Estimate,  and  this,  added  to  the  amount 
paid  through  condemnation  proceedings,  makes  a  grand 
total  of  $19,885,835.93,  and  this  is  about  the  yearly 
average  paid  for  property  taken  for  public  improvements. 
The  City  has  at  the  present  time  under  contemplation  or 
discussion  over  $100,000,000  worth  of  real  estate,  and 
this  does  not  include  the  Catskill  watershed  and  aqueduct. 
In  the  case  of  the  extension  of  Riverside  Drive  between 
1 58th  and  i65th  Streets,  the  Commissioners  made  an 
award  of  $1,000,000,  but  afterward  reduced  it  to  $600,000. 

In  the  matter  of  the  approach  on  the  Brooklyn  side 
of  Bridge  No.  3,  the  award  of  $1,000,000  was  reduced 
10%,  as  the  City  had  paid  6%  for  two  years  after  the 
title  had  vested  in  the  City.  In  the  case  of  the  extension 

134 


How  Property  is  Condemned 

of  High  Bridge  Park  the  Commissioners  made  a  partial 
report  resolving  an  award  of  $820,000,  with  only  two 
parcels  in  one  plot  under  discussion.  Three  years  have 
been  consumed  and  interest  charged  at  6%  per  annum 
and  special  counsel  employed  at  a  salary  of  $5,000  per 
annum.  This  does  not  include  the  Commissioners'  fees, 
which  will  probably  be  $4,000  each. 

Before  closing  this  matter  I  would  like  to  mention 
a  commission  appointed  twelve  years  ago  to  take  tes- 
timony regarding  property  at  Purdy's  Station,  part  of 
which  has  been  used  for  years  for  the  Cornell  Dam. 
The  report  has  just  been  made,  and  the  award  is  $70,000 
to  owners,  the  interest  is  $50,400,  and  the  expenses  will 
be  at  least  $40,000  more,  making  expense  $90,400  to 
condemn  property  worth  $70,000. 

New  Plan  for  Condemnation 

The  mode  of  appointing  commissioners  as  now  pro- 
vided should  be  changed  and  entirely  removed  from 
politics.  The  power  of  appointment  should  rest  with 
some  reputable  body  of  sound  hard-headed  business  men 
like  the  Chamber  of  Commerce  or  some  similar  body 
or  organization.  The  city  should  be  divided  in  sections, 
like  south  of  I4th  Street,  East  Side ;  south  of  I4th  Street, 
West  Side ;  I4th  Street  to  59th  Street,  East  Side ;  same 
on  the  West  Side;  uoth  Street,  East  Side;  same  on 
West  Side;  uoth  Street  on  East  Side  to  Harlem  River; 
West  Side  to  West  i5Oth  Street;  Washington  Heights; 
Bronx.  Three,  six,  nine  or  twelve  commissioners  could 
be  appointed  to  each  district  as  the  improvements  might 
warrant  or  according  to  the  population.  Each  com- 
mission should  be  comprised  of  three  men,  the  chairman 

135 


Practical  Real  Estate  Methods 

being  a  member  of  the  bar  at  a  salary  of  $10,000  per 
year;  the  other  two  members  should  receive  $7,500, 
and  be  appointed  for  a  term  of  years,  during  their 
usefulness  to  the  community  or  until  they  arrive  at 
the  age  of  seventy  years.  They  should  hold  sessions 
every  day  in  the  week  except  Saturday  and  Sunday, 
and  for  the  same  number  of  hours  that  court  is  now 
held  by  the  justices  of  the  Supreme  Court.  These 
Commissioners  should  act  only  in  case  of  a  dispute 
between  the  City  and  the  owner  of  the  property  the 
City  is  about  to  take.  All  property  should  be  purchased 
within  sixty  days  from  the  day  it  is  selected  for  a 
public  improvement  and  paid  for  on  the  day  on  which 
the  title  is  vested  in  the  City. 

The  price  should  be  arrived  at  by  two  or  three  real 
estate  experts  making  their  appraisals  for  the  City  and 
finally  agreeing  on  an  amount  among  themselves  as 
proper  to  pay  for  the  property.  This  amount  should 
be  paid  on  the  day  of  taking  title;  and  if  the  amount 
is  not  acceptable  to  the  owner,  he  should  be  allowed  to 
accept  this  amount  as  part  payment  and  go  before  one 
of  these  sets  of  commissioners,  according  to  the  district, 
and  prove  the  value  of  his  property,  and  endeavor  to 
get  the  difference  between  his  figures  and  the  amount 
he  has  been  paid.  An  example,  for  instance,  would  be: 
The  owner's  value  is  $200,000;  the  City  pays  $150,000. 
The  owner  goes  before  the  commissioners  to  secure  the 
difference,  or  $50,000.  In  this  manner,  the  owner  has 
$150,000  in  cash  that  he  can  use  immediately;  and  only 
$50,000,  or  whatever  amount  he  is  awarded,  is  tied  up  for 
an  indefinite  time,  and  drawing  interest  from  the  time 
of  taking  title  up  to  the  date  of  payment  of  award  at 
6%  as  now  provided. 

136 


How  Property  is  Condemned 


Amendment  to  Constitution 

Senator  Brough  has  introduced  a  bill  at  Albany  pro- 
viding for  an  amendment  to  Article  VI  of  the  State 
Constitution  as  follows:  The  Legislature  may  establish 
a  court  of  record  in  any  county  not  contained  with  other 
counties  within  a  city  or  in  any  city  containing  within 
its  boundaries  more  than  one  county,  which  court  may 
be  vested  with  original  jurisdiction  in  proceedings  for 
taking  private  property  for  public  use,  assessing  property 
for  benefits  and  awarding  damages,  and  in  the  proceed- 
ings for  the  review  of  assessments  of  property  for  taxa- 
tion. Judges  of  such  court  shall  sit  without  jury.  They 
shall  be  appointed  in  such  manner  and  hold  office  for 
such  term  as  the  Legislature  may  prescribe. 

In  order  for  this  resolution  to  become  an  amendment 
it  is  necessary  for  the  Legislature  to  pass  it  at  this  session, 
to  repass  it  in  1911  and  in  the  fall  of  that  year  submit 
it  to  the  people  to  be  adopted  by  a  majority  vote. 


METHODS  IN  OTHER  STATES 

The  following  data  as  to  the  methods  of  condemna- 
tion in  other  States  of  the  United  States  and  in  many 
foreign  countries  have  been  compiled  with  a  view  to 
supplying  information  to  those  interested  in  legislative 
improvement  of  condemnation  practice. 

Maine 

Private  individuals  and  corporations  obtain  right  of 
eminent  domain  in  Maine  by  an  act  of  the  Legislature 

137 


Practical  Real  Estate  Methods 

granted  to  them  specifically.  Towns  may  take  lands  for 
highways  under  a  general  statute,  and  disputes  as  to 
damages  are  settled  by  the  County  Commissioners'  Court. 

Maryland 

The  usual  method  employed  in  Maryland  is  for  pro- 
ceedings to  be  taken  in  any  of  the  courts  and  a  jury 
impanelled  to  hear  evidence  and  fix  upon  the  price  to 
be  paid. 

Michigan 

Private  property  may  be  taken  for  any  public  im- 
provement in  Michigan.  The  City  Attorney  institutes 
the  proceedings  before  a  Probate  Court  and  a  jury. 
The  jury  hears  evidence;  views  the  place  of  improve- 
ment, and  makes  the  award  and  provision  for  payment 
of  all  mortgages  on  the  property.  Should  the  first  jury 
disagree  another  is  impanelled.  Any  party  aggrieved 
by  the  judgment  of  confirmation  may,  within  ten  days 
after  entry,  appeal  to  the  Circuit  Court.  Within  one 
year  after  the  confirmation  of  the  verdict  of  the  jury, 
or  after  the  judgment  of  confirmation  shall  on  appeal 
be  confirmed,  the  counsel  shall  set  apart  and  provide 
in  the  Treasury  the  amount  of  compensation  to  the  owner 
or  owners  as  awarded  by  the  said  verdict. 

Montana 

Property  is  acquired  in  Montana  by  private  purchase, 
but  if  no  agreement  can  be  reached,  application  may 
be  made  to  the  Court.  The  Court  appoints  a  commis- 
sion of  three  persons  who  fix  the  price,  which  can  then 
be  accepted.  If  rejected  by  either  party,  the  case  goes 

138 


How  Property  is  Condemned 

directly  to  the  Court,  and  a  jury  of  twelve  decides  what 
the  compensation  shall  be. 

Connecticut 

If  the  trustees  of  any  State  institution  in  Connecticut 
need  more  land,  they  have  the  power  to  purchase  it, 
if  possible,  at  private  sale.  If  they  cannot  agree  with 
the  owner  on  a  price  they  make  application  to  the  Supe- 
rior Court,  and  three  disinterested  men  are  appointed 
as  a  committee.  They  view  the  property  and  make  a 
report  to  the  Court.  If  the  report  is  not  satisfactory, 
another  committee  of  three  is  appointed.  If  the  report 
is  accepted,  it  is  considered  as  judgment  for  the  owner 
for  the  amount  of  the  assessment  made  by  the  committee. 
The  property,  however,  cannot  be  used  or  enclosed  until 
the  amount  of  the  assessment  is  paid  to  the  owner. 

Idaho 

Property  is  condemned  in  Idaho  for  public  purposes 
only  by  a  suit,  instituted  by  the  party  seeking  to  obtain 
it,  in  the  district  court  of  the  district  in  which  the  prop- 
erty is  situated.  The  amount  of  remuneration  is  left 
to  a  jury.  In  certain  cases  a  board  of  commissioners 
may  be  appointed  by  the  court  to  assess  the  damages 
sustained,  and  their  determination  of  the  amount  of 
damages  may  be  accepted  as  final  by  the  parties  to 
the  action. 

North  Carolina 

The  right  of  condemnation  in  North  Carolina  is 
granted  to  bridge  companies,  canal  companies,  electric 
companies,  mill  owners  (limited),  plankroad  companies, 

139 


Practical  Real  Estate  Methods 

railroad  companies  for  right  of  way  or  to  construct 
union  depots,  street  railway  companies,  telegraph  and 
telephone  companies,  and  turnpike  companies. 

Vermont 

The  selectmen  of  a  town  in  Vermont  determine  the 
portion  of  lands  required  for  a  public  purpose  and 
thereupon  appoint  a  time  and  place  for  hearing  upon 
the  question  whether  such  lands  are  required  for  such 
purpose.  Notice  of  this  hearing  is  given  to  all  persons 
interested,  either  personally  or  by  written  notice.  At 
a  hearing,  the  selectmen  ascertain  the  damages  sus- 
tained by  such  interested  persons  through  the  taking 
of  such  land.  The  damages  are  then  tendered  to  such 
persons.  An  appeal  usually  lies  from  the  decisions  of 
the  Board  of  Selectmen  to  the  County  Court,  both 
upon  the  question  of  the  necessity  for  taking  such  lands 
and  also  upon  the  question  of  damages.  The  County 
Court  thereupon  usually  appoints  commissioners  to  sit 
in  the  premises.  When  the  commissioners  file  their 
report,  the  Court  passes  judgment  thereon  as  it  deems 
right.  Sometimes,  special  provision  is  made  for  the 
reference  of  a  question  of  damages  to  one  or  more  dis- 
interested persons  or  to  a  justice  of  peace,  who  may 
thereupon  appoint  commissioners  to  appraise  damages. 

Washington 

In  the  condemnation  of  property  in  Washington  much 
can  be  done  by  a  common  carrier,  or  some  corpora- 
tion that  has  a  public  or  quasi-public  function.  Other- 
wise, on  general  principles,  property  cannot  be  con- 
demned. For  instance,  a  railroad,  to  be  able  to  condemn 

140 


How  Property  is  Condemned 

property,  must  be  a  common  carrier,  and  not  a  private 
road  of  any  kind.  To  condemn  property,  an  action 
in  court  must  be  brought  where  the  parties  cannot  agree. 
If  they  do  not  agree  that  the  trial  judge  shall  settle  the 
price,  a  jury  must  be  called  to  do  it. 

CONDEMNATION  IN  OTHER  COUNTRIES 

For  the  following  information  as  to  the  methods  of 
expropriation  of  property  in  many  foreign  countries, 
the  writer  is  indebted  to  the  American  ambassadors, 
ministers  and  consular  representatives  in  the  several 
countries. 

Cuba 

Laws  governing  procedure  for  the  condemnation  of 
property  in  Cuba  were  made  December  15,  1841,  and 
in  regulations  of  July  10,  1858,  and  the  instructions  of 
September  28,  1865.  In  the  case  of  condemnation  for 
railroads,  there  are  special  provisions  governing  the 
procedure  in  the  railroad  law  known  as  Civil  Order 
No.  34  of  1902. 

Nicaragua 

Expropriation  for  public  purposes  is  not  made  in 
Nicaragua  without  the  indemnity  provided  by  law.  The 
Law  of  1883,  summarized,  is  as  follows:  That  a  com- 
petent person  give  his  opinion  as  to  suitability  of  prop- 
erty for  the  purpose  required;  if  he  favors  it,  it  is  de- 
clared of  public  utility.  Appraisement  and  indemnity 
follow. 

Roumania 

The  laws  of  Roumania  are  copied  after  those  of 
France.  Briefly,  no  property  may  be  expropriated  ex- 

141 


Practical  Real  Estate  Methods 

cept  for  public  use  and  a  commission  must  decide  the 
questions.  The  property  must  be  paid  for  in  advance 
of  actual  expropriation. 


Argentine  Republic 

As  nearly  as  can  be  learned,  Argentine  Republic  has 
made  greater  strides  in  law  governing  the  expropria- 
tion of  property  than  any  other  South  American  repub- 
lic. No  person  can  be  deprived  of  his  property  except 
by  reason  of  public  utility,  and  upon  a  just  indemnity, 
proper  expropriation  proceedings  having  been  previously 
instituted.  By  "just  indemnity"  is  understood  the  pay- 
ment not  only  of  the  actual  value  of  the  property,  but 
also  of  the  direct  damages  caused  by  the  expropriation. 
Whenever  the  nature  of  the  expropriation  is  so  necessary 
that  it  is  not  possible  for  proceedings  of  any  kind,  the 
public  authority  may,  under  its  responsibility,  dispose 
of  the  property  immediately.  Railroads  receive  merely 
the  right  of  way,  and,  unlike  railroads  through  Western 
States  do  not  receive  several  miles  of  property  on  each 
side  of  the  railroad  along  its  entire  length.  This  was 
contrary  to  our  methods  and  did  not  appeal  to  American 
capital,  with  the  result  that  South  American  railroads 
were  almost  entirely  built  by  European  capital,  a  portion 
of  the  same  being  deposited  with  the  government  and 
returned  to  the  company  so  much  per  mile  as  the  work 
progressed. 

China 

No  condemnation  laws  are  needed  as  all  the  titles- 
in  China  are  vested  in  the  Emperor  who  leases  them  to 
his  subjects  for  terms  deemed  proper. 

142 


How  Property  is  Condemned 


Costa  Rica 

When  the  government  of  Costa  Rica  needs  or  authorizes 
the  expropriation  of  private  property,  it  publishes  a  decree 
stating  the  fact  and  the  public  reasons  therefor  and 
names  a  date  for  the  appointment  of  experts  to  fix  the 
value  of  the  property.  On  this  date  they  meet,  and, 
if  they  do  not  agree,  appoint  jointly  a  third  expert.  The 
majority  decide  the  value  due  the  property  owner.  The 
first  two  experts  are  appointed  as  usual,  one  representing 
the  government,  and  the  other  the  property  owner  or 
owners.  The  government  pays  the  amount  fixed  and 
takes  possession. 

Mexico 

When  property  is  condemned  in  Mexico  for  public 
improvement  and  the  owner  or  owners  do  not  agree 
to  the  valuation  set  by  the  tax  office  and  the  known 
value  of  the  property,  the  Federal  District  Judge  appoints 
an  appraiser  and  requires  the  owner  to  do  likewise  in 
(8)  eight  days.  Though  the  appraisers  can  accept  or  reject 
their  appointments,  they  can  not  refuse  to  act  once 
they  have  signified  their  willingness.  Should  the  owner 
not  appoint  an  appraiser,  the  Judge,  acting  ex-officio, 
or  at  the  instance  of  the  public  prosecutor,  requires  him 
to  do  so  within  forty-eight  hours.  Otherwise,  the  valua- 
tion of  the  state's  officer  will  be  accepted.  If  valuations 
are  not  submitted  within  eight  days,  they  suffer  a  fine 
for  each  day.  If  at  the  end  of  the  second  eight  days, 
one  valuation  is  submitted,  the  award  will  be  based  on 
that.  If  neither  is  submitted,  the  judge  will  appoint  a 
third  appraiser  to  settle  the  matter. 

'43 


Practical  Real  Estate  Methods 
Brazil 

Property  expropriated  in  Brazil  cannot  be  paid  for 
to  a  greater  extent  than  10  or  15  times  its  rental  value. 
Should  there  be  any  disagreement  regarding  the  amount, 
the  government  is  authorized  to  pay  the  minimum  price 
demanded  or  stated,  take  possession  of  the  property  and 
pay  the  difference  as  soon  as  agreed  between  the  gov- 
ernment and  the  owner.  Property  can  be  expropriated 
for  any  public  improvement.  If  the  property  taken  is 
more  than  one-half  of  the  total  plot,  or  if  the  most 
valuable  part  is  taken  by  the  government,  the  owners 
can  force  the  government  to  take  the  entire  plot. 

Peru 

The  Law  of  Expropriation  of  Peru,  October  25,  1900, 
provides  that  property  expropriated  for  public  utility 
must  be  valued  immediately  and  an  appropriate  indem- 
nity handed  over  previously,  and  in  cash.  All  works 
destined  to  serve  for  the  general  good  of  two  or  more 
towns  or  provinces  are  considered  for  public  utility. 
In  all  cases  of  compulsory  expropriation,  beside  the  price 
at  which  the  property  is  valued,  an  extra  one  per  cent 
must  be  paid  to  the  owner  for  good  will  and  five  per 
cent  as  indemnity. 

Persia 

At  present  there  is  no  legal  method  by  which  property 
can  be  condemned  for  public  improvement  in  Persia. 
Real  estate  can  legally  be  taken  from  an  owner  for  such 
improvement  only,  with  the  consent  of  the  owner  and 
on  terms  agreed  to  by  him.  But  property  wanted  by 
the  government  is  taken  by  force,  providing  the  owner 

144 


How  Property  is  Condemned 

is  not  a  person  of  sufficient  wealth  or  importance  to 
prevent  this  being  done. 

Siam 

The  only  property  expropriated  in  Siam  is  for  rail- 
ways which  are  owned  principally  by  the  government. 
There  are  but  few  roads  and  these  are  near  Bangkok. 
Almost  all  communication  is  carried  on  by  water,  as 
their  mode  of  travel  is  through  canals.  If  these  canals 
are  extended,  it  is  usually  through  waste  land,  and  an 
agreement  is  reached  direct  with  the  owner,  as  he  is 
only  too  happy  to  have  the  improvement.  When  a 
new  railroad  is  to  be  built  or  lines  extended,  a  royal 
proclamation  is  issued  and  the  land  staked  out  by  sur- 
veyors. Commissioners  and  owners  try  to  agree,  each 
calling  in  an  arbitrator,  if  necessary,  and  finally  an 
umpire. 

Chile 

No  one  can  be  deprived  of  property  in  Chile  except 
by  judicial  decree  or  by  right  of  eminent  domain,  in 
which  last  case  the  owner  first  receives  an  indemnity 
to  which  he  agrees  or  which  is  fixed  by  "good  men." 
In  case  the  owner  and  the  government  cannot  agree, 
each  appoints  an  appraiser  and,  in  case  of  a  tie,  a  third 
is  appointed.  Only  experts  of  highest  repute  can  act. 
Government  and  municipal  employees  are  barred  from 
acting  in  such  a  capacity.  The  sum  agreed  upon  must 
be  paid  before  the  owner  is  obliged  to  give  up  pos- 
session. 

Morocco 

There  is  no  law  existing  at  present  covering  con- 
demnation of  property  in  Morocco.  Under  the  General 

145 


Practical  Real  Estate  Methods 

Act  of  Algeciras,  however,  the  condemnation  of  the 
property  for  public  improvements  is  provided  for,  and 
regulations  regarding  the  same  have  been  drawn  up 
by  the  Diplomatic  Corps  at  Tangier  and  the  Shereefian 
Delegates  and  submitted  to  their  respective  governments 
for  approval.  These  regulations  are,  however,  not  in 
execution  pending  the  settlement  of  dynastic  questions 
and  others  in  that  country. 

Haiti 

The  government  of  Haiti  notifies  the  owners  that  it 
is  willing  to  pay  for  property  in  question.  Fifteen  days 
after  this  the  owner  notifies  the  government  as  to  whether 
or  not  he  accepts  the  government's  offer.  If  the  gov- 
ernment's offer  is  not  accepted,  the  owners  are  sum- 
moned to  appear  before  the  Civil  Court  for  the  purpose 
of  regulating  the  matter.  A  jury  of  three  (3)  or  six  (6) 
citizens  is  chosen  from  property  owners  in  the  section 
where  the  property  to  be  condemned  is  located.  These 
jurors  examine  all  documents  and  evidences  presented, 
and  upon  their  judgment  depends  the  result,  a  majority 
vote  deciding  the  matter. 

Guatemala 

The  following  procedure  is  necessary  to  condemn 
property  in  Guatemala: 

1st.  Declaration  of  public  necessity  and  usefulness  of 
the  work,  in  general. 

2nd.  Declaration  that  all  or  a  portion  of  the  property 
whose  condemnation  is  requested  is  absolutely  necessary 
for  the  execution  of  the  work. 

3rd.  Appraisement  of  the  property. 

146 


How  Property  is  Condemned 

4th.  Previous  payment  of  value  of  same.  In  case  of 
war,  the  indemnity  may  not  be  paid  in  advance. 

The  declaration  of  public  necessity  and  usefulness  is 
made  by  the  executive  power.  The  owners  of  the  prop- 
erty whose  condemnation  is  deemed  necessary  are  noti- 
fied of  this  and  are  allowed  three  days  to  object.  If 
any  objection  is  made,  the  government  decides  the  ques- 
tion. 

After  the  condemnation  of  a  certain  lot  is  decided, 
the  owner  appoints  one  expert,  and  the  authorities  ap- 
point one  expert  and  an  umpire  to  decide  upon  the 
value  of  the  property.  A  law  enacted  after  the  general 
law  upon  this  matter  establishes  that  property  can  be 
condemned  for  the  assessed  value  without  appraisement. 


Japan 

Land  in  Japan  may  be  condemned  for  military  pur- 
poses, public  works,  railways,  tramways,  or  for  any 
public  purpose  decided  upon  by  the  imperial  or  local 
governments.  In  all  cases,  except  condemnation  for 
military  purposes,  the  project  must  bear  the  approval 
of  the  Imperial  Cabinet. 

After  approval  by  the  Cabinet,  public  notice  of 
the  condemnation  is  given  by  the  imperial  government 
and  by  the  governor  of  the  prefecture  in  which  the  con- 
demned site  is  situated.  This  notice  gives  a  description 
of  the  premises,  and  the  purpose  for  which  they  are 
to  be  condemned.  Special  private  notice  is  also  given 
to  the  owner  and  to  interested  parties  by  the  governor, 
and  an  opportunity  for  private  negotiation  is  allowed. 
If  a  private  settlement  cannot  be  reached,  the  case  is 

147 


Practical  Real  Estate  Methods 

brought  before  a  committee  composed  of  the  governor 
of  the  prefecture  (chairman),  three  higher  civilian  offi- 
cials and  three  members  of  the  Honorary  Prefectural 
Council.*  This  committee  has  full  power  to  decide  upon 
the  boundaries  of  the  site,  the  compensation  therefor 
and  the  time  and  terms  of  evacuation  and  possession. 
Appeal  may  be  had  to  the  Home  Minister,  who  has 
general  supervisory  control  over  all  condemnation  pro- 
ceedings. In  cases  where  a  claim  of  illegality  of  pro- 
cedure or  jeopardizing  of  rights  is  made,  the  cause  may 
be  brought  before  the  Administrative  Court.**  Claims 
for  compensation  different  from  that  awarded  by  the 
committee  may  be  brought  before  the  Justice  Court.f 

The  procedure  in  condemning  land  for  military  pur- 
poses is  much  simpler.  The  Minister  for  War  notifies  the 
governor  of  the  prefecture  that  a  certain  site  is  to  be 
condemned,  and  the  governor  in  turn  notifies  the  owner 
and  interested  parties.  The  compensation,  extent  of 
the  site  and  time  of  evacuation  and  possession  are  all 
decided  by  the  Minister  for  War. 

*Governors  of  Prefectures  are  appointed  by  the  Emperor. 
"Higher  Civilian  Officials"  are  civil  prefectural  officials  appointed 
by  the  Imperial  Government  at  Tokyo.  "Members  of  the  Hon- 
orary Prefectural  Council"  are  members  of  the  Prefectural  As- 
sembly (which  is  elected  by  what  is  called  popular  vote)  who 
are  also  members  of  the  Governor's  Council,  a  body  composed 
of  the  Higher  Civilian  Officials,  and  some  members  of  the 
Assembly. 

**The  Administrative  Court  corresponds  somewhat  roughly  to 
our  Court  of  Claims. 

fThe  Justice  Court  is  much  the  same  thing  as  the  Circuit 
Court  in  Michigan,  the  Supreme  Court  in  New  York — in  fact,  a 
"Court  of  Justice." 

148 


How  Property  is  Condemned 

In  case  a  condemned  site  becomes  unnecessary  for 
the  purpose  for  which  it  was  condemned,  it  may,  if  a 
period  of  twenty  years  has  not  elapsed,  be  purchased 
by  the  former  owner  or  his  heirs  at  the  condemnation 
price. 

Bribery  in  connection  with  condemnation  proceedings 
is  punishable  by  fine  and  imprisonment  of  all  parties 

concerned. 

% 

Russia 

No  property  can  be  expropriated  in  Russia  for  gov- 
ernment or  city  improvements  except  in  accordance  with 
the  Russian  laws  or  by  imperial  ukase. 

The  laws  governing  the  expropriation  of  property  are 
contained  in  the  Civil  Laws  of  Russia,  Volume  X,  para- 
graphs 575  et  seq.,  and  are  divided  into  two  sections, 
the  substance  of  which  is  as  follows : 

I.  The  expropriation  of  land  in  the  provinces  for 
government  requirements,  such  as  the  building  of  rail- 
ways or  military  follows  this  procedure: 

The  Ministry  of  Ways  of  Communication  or  the  Min- 
istry of  War  prepare  a  project  of  the  railroad,  fortress, 
barracks,  etc.,  showing  what  land  must  be  expropriated. 
The  plans  are  presented  to  the  Council  of  Ministers, 
and  when  passed  upon  are  forwarded  to  the  Council 
of  the  Empire,  which,  having  approved  the  project,  pre- 
sents it  to  the  Emperor,  who  issues  an  ukase  for  its 
execution. 

A  special  committee  is  then  appointed  by  the  Council 
of  the  Empire  to  decide  what  amount  must  be  allowed 
for  the  expropriation  of  the  land  required. 

The  land  owners  are  informed  that  certain  portions 
or  the  whole  of  their  property  are  required  by  the  gov- 

149 


Practical  Real  Estate  Methods 

ernment,  and  they  are  invited  to  present  to  the  com- 
mittee a  valuation  of  their  property.  If  the  committee 
finds  the  valuation  reasonable,  it  may  settle  the  matter 
at  once;  if  it  finds  the  estimate  presented  unreasonable, 
it  appoints  experts  to  make  a  real  valuation.  In  making 
the  real  valuation  these  experts  invite  the  landlords  of 
property  in  the  neighborhood  and  take  into  considera- 
tion the  average  price  of  land  in  that  district,  the  price 
paid  for  the  land,  the  improvements  made  on  the  land, 
and  the  income  derived  from  the  land  in  question,  as 
well  as  other  local  conditions.  Having  arrived  at  what 
they  consider  a  fair  estimate,  the  experts  report  to  the 
Council  of  the  Empire,  which  decides  the  amount  to  be 
paid  for  such  land,  and  the  matter  is  thus  ended.  An 
imperial  ukase  being  above  the  law,  there  is  no  court 
to  which  an  appeal  can  be  presented.  It  frequently 
occurs  that  the  government  offers  in  exchange  for  the 
land  expropriated  other  land,  sometimes  in  larger  quan- 
tity, farther  away,  and  the  offer  is  accepted,  in  which 
case  the  government  waives  the  stamp  and  registration 
dues  for  the  new  title  deed. 

II.  The  method  of  expropriation  of  land  and  house- 
hold property  in  cities  is  as  follows: 

The  manner  of  procedure  for  the  expropriation  of 
land  and  household  property  in  the  two  capitals,  namely, 
Moscow  and  St.  Petersburg,  is  the  same  as  that  for 
railways  and  other  government  requirements.  In  the 
other  cities  of  Russia,  while  plans  must  be  presented, 
in  the  same  manner  as  above  stated,  to  the  Council  of 
the  Empire,  the  execution  of  the  plans,  when  approved, 
is  left  to  the  provincial  city  authorities  and  zemstvos, 
who  in  like  manner  must  come  to  a  fair  understanding 
with  the  land  owners  or  householders  according  to  the 

150 


How  Property  is  Condemned 

laws  mentioned  above.  They  must  take  into  consid- 
eration the  price  for  which  the  land  or  property  was 
purchased,  the  value  of  property  in  the  immediate  neigh- 
borhood, improvements  which  may  have  been  made  on 
the  property,  and  lastly  the  income  derived  from  such 
property. 


EXPERT  TESTIMONY 

JOHN  MEANS  THOMPSON 

How  to  Examine  Property — Danger  in  Speculative 
Values — Objection  to  Rules — Interior  Lots — Con- 
sequential Damage — Water-front  Appraisals — Valu- 
ing Leaseholds — Tax,  Condemnation,  and  Court  Pro- 
ceedings— Capitalization  as  a  Factor  of  Value 

EXPERT  testimony  is  but  appraising  in  a  higher  de- 
gree, and  is  the  nearest  approach  to  a  science  that 
our  profession  affords. 

Let  me  caution  witnesses  that  in  cases  in  which  they 
are  to  give  expert  testimony  they  should  thoroughly 
understand  the  case  and  study  all  its  surroundings.  In 
cross-examination  they  will,  in  almost  every  instance, 
be  confronted  by  a  shrewd  lawyer  watching  for  an 
opening  by  which  he  can  expose  them  to  searching  cross- 
examination  and  break  down  their  guard.  If  their  case 
is  carefully  prepared  and  they  have  their  subject  well 
in  hand  and  will  keep  control  of  themselves,  they  will 
find  they  are  more  than  a  match  for  the  most  astute 
cross-examiner.  His  knowledge  must  be,  at  best,  but 
theoretical,  while  their  knowledge,  which  is  gained  from 
actual  experience,  gives  strength  to  their  case  and  should 
inspire  such  confidence  in  themselves  as  to  disarm  any- 
thing that  the  opposing  attorney  may  advance.  They 
should  not  be  hasty  in  their  answers,  but  sharp,  decisive 
and  to  the  point.  They  should  be  careful  not  to  advance 


Expert  Testimony 

an  opinion  in  such  a  way  that  it  will  give  offense ;  should 
exercise  care  and  diplomacy.  Oftentimes,  if  it  is  done 
in  this  way,  opponents  will  not  object  to  testimony  even 
if  statements  may  not  be  within  the  strict  rules  of  evi- 
dence. Above  all  things,  they  should  keep  their  tempers. 
I  know  of  one  attorney  who  tries  to  anger  a  witness 
in  the  hope  of  exciting  him,  and  anger  him  he  often 
does  by  his  rudeness.  I  have  found  the  only  thing  to 
do  is  to  keep  my  temper  outwardly  at  least,  and  with 
studied  politeness  ignore  the  insinuations  and  sarcasms. 

The  next  most  important  thing  to  remember  is  that 
a  careful  record  should  be  kept  of  testimony  in  all  cases. 
One  never  knows  when  he  will  be  confronted  by  former 
statements  and  will  find  it  most  embarrassing  if  it  be 
not  in  accord  with  present  testimony  or  if  any  discrepancy 
cannot  be  reconciled.  The  giving  of  hasty  opinion  is 
to  be  avoided;  it  is  far  better  to  say  the  question  asked 
has  not  been  considered  and  that  it  is  impossible  to 
answer  it  until  further  examination  into  the  matter. 

Copious  notes  of  an  examination  and  a  full  set  of  all 
figures  are  an  advantage.  Do  not  rely  upon  memory, 
do  not  be  disconcerted  by  the  attorney  who  asks  you 
if  you  cannot  testify  without  your  notes,  for  it  is  an 
impossibility  to  do  so,  and  the  Court  will  readily  recog- 
nize the  fact.  Above  all,  if  asked  to  make  calculations 
on  the  witness  stand,  do  not  become  confused,  but  make 
calculations  deliberately.  It  will  be  far  better  to  spend 
the  time  in  this  way  than  to  make  an  error  difficult  of 
correction. 

The  first  step  in  preparing  any  case  is  to  make  a 
thorough  examination  of  the  property  concerning  which 
you  are  to  testify.  I  would  suggest  that  you  take  with 
you  a  stenographer,  for  if  you  dictate  notes  they  will 

153 


Practical  Real  Estate  Methods 

be  of  much  value  to  you  in  the  future,  especially  if 
the  proceedings  are  of  long  duration  and  the  buildings 
are  likely  to  be  destroyed  prior  to  your  giving  testimony. 

Next  study  carefully  the  neighborhood  and  surround- 
ings, the  present  conditions  and  any  changes  that  are 
likely  to  take  place  in  the  immediate  future  that  will 
have  their  effect  on  values.  I  try  as  a  rule  to  be  able 
to  describe  (in  a  general  way)  every  block  contiguous 
to  the  property  to  be  taken.  When  I  testified  in  the 
Bellevue  Hospital  proceedings  I  was  able  to  detail  the 
character  of  every  block  from  24th  to  32nd  Streets  on 
First  Avenue  and  describe  the  character  of  the  buildings. 
In  addition  I  could  tell  the  use  of  each  pier  and  bulkhead 
on  the  East  River  from  8th  to  32nd  Streets.  This 
covered  a  very  wide  area,  but  I  found  that  it  was  of 
considerable  benefit  to  me  in  giving  my  testimony,  and 
I  would  advise  this  course  wherever  possible. 

The  next  step  in  preparing  a  case  is  to  make  a  careful 
study  and  analysis  of  sales  made  in  the  neighborhood. 
If  much  vacant  property,  or  property  practically  vacant 
by  reason  of  old  buildings,  has  been  sold,  and  you  can 
get  a  line  on  the  prices  obtained,  it  is  of  very  great 
assistance.  If  only  improved  property  is  sold  the  task 
is  more  difficult,  for  then  you  have  to  analyze  the 
sales;  that  is,  distinguish  between  the  value  of  the  land 
and  the  improvements. 

If  you  have  not  made  many  sales  in  the  locality,  you 
will  perhaps  have  had  negotiations  for  property,  and, 
I  sometimes  think,  negotiations  are  of  as  much  value 
as  actual  sales  for  the  purpose  of  obtaining  knowledge 
as  to  values.  Failing  to  have  had  either  sales  or  nego- 
tiations on  your  own  account,  you  will  find  that  there 
have  been  sales  made  by  others,  especially  purchases  and 

154 


Expert  Testimony 

sales  by  operators.  In  times  past,  and  even  now,  I 
have  had  the  valuable  advice  of  men  who  actually  in- 
vested their  money  or  disposed  of  their  property.  Of 
course,  in  suggesting  this  plan  I  am  assuming  that  before 
any  attempt  is  made  to  qualify  as  an  expert  you  have 
had  years  of  experience  and,  if  not  a  wide  knowledge 
of  values  in  a  given  locality,  at  least  a  wide  acquaintance 
with  men  whose  opinions  are  worth  more  even  by  reason 
of  their  purchases  and  sales,  not  as  brokers,  but  as 
principals. 

While  a  competent  expert  may  not  have  to  adopt  this 
plan,  it  is  of  great  value  to  the  expert  in  the  beginning 
of  his  career  and  it  is  well  to  start  in  this  way.  With 
an  experience  of  many  years,  covering  every  section  of 
Manhattan  and  including  some  of  the  largest  cases  in 
the  city,  I  always  adopt  these  methods  if  I  am  not 
absolutely  certain  of  my  ground,  feeling  that  a  little 
extra  work  beforehand  is  better  than  to  exhibit  any 
uncertainty  on  the  witness  stand. 

An  appraiser  should  also  acquaint  himself  as  far  as 
possible  with  existing  leases,  mortgages  and  projected 
improvements  in  the  neighborhood  of  the  property  in 
question. 

Speculative  Values 

It  is  also  important  that  the  expert  keep  himself  well 
posted  as  to  current  values,  especially  where  increases 
have  been  sudden.  The  expert  must  learn  to  differentiate 
between  a  permanent  rise  and  one  that  is  evanescent 
or  purely  speculative.  Striking  illustrations  of  this  are 
the  Carnegie  boom  and  the  rise  in  the  Pennsylvania 
Terminal  section.  Following  the  first  Carnegie  purchase 
in  February,  1899,  there  was  a  rush  to  buy  on  Fifth 

155 


Practical  Real  Estate  Methods 

Avenue  on  "Carnegie  Hill."  This  continued  far  into 
1902,  and  yet  I  know  to-day  of  many  instances  where 
owners  are  trying  to  sell  at  a  great  discount  or  are 
holding  their  vacant  property  paying  large  interest  and 
charges  hoping  that  the  figures  at  which  they  purchased 
will  be  reached  again.  On  the  other  hand,  there  has 
been  a  rise  in  the  Pennsylvania  Railroad  section  and 
Times  Square,  where  prices  have  jumped  by  leaps  and 
bounds  until  it  is  very  difficult  for  an  expert  to  keep 
in  touch  with  the  ever  increasing  values.  These  values 
have  continued  to  rise  and  will  continue  to  increase  by 
reason  of  such  substantial  improvements  as  the  Penn- 
sylvania Railroad  Station,  the  New  York  and  New 
Jersey  Tunnel  Terminal  and  the  establishment  of  other 
subways  and  means  of  transportation  in  the  immediate 
neighborhood.  It  is  difficult  to  discriminate  between 
such  permanent  and  stable  values  and  the  fictitious  prices 
which  are  the  result  of  a  purely  speculative  movement. 
A  thorough  study  of  the  cause  of  these  sudden  rises 
will  enable  a  competent  expert  to  decide  whether  these 
values  will  fluctuate  or  remain  stationary. 

Objection  to  Rules 

There  is  a  general  tendency,  I  think,  on  the  part  of 
many  expert  appraisers  to  follow  certain  general  rules 
for  appraising  property.  In  some  cases,  of  course,  it 
is  advisable  to  use  certain  rules,  as  I  shall  point  out 
later,  but  for  the  most  part  I  have  found  that  the  judg- 
ment of  an  expert  is  very  much  better  than  any  fixed 
rule.  It  has  been  my  experience  that  no  rule  will  apply 
to  any  great  number  of  cases.  The  City  Tax  Department 
has  certain  rules  for  appraising  lots  of  a  greater  depth 

156 


Expert  Testimony 

than  the  standard  lot  of  100  feet.  There  is  another 
rule  for  appraising  a  short  lot  known  as  the  Hoffman 
Rule.  I  doubt  if  it  was  practicable  even  at  the  time 
when  Judge  Hoffman  established  it,  which  was,  I  think, 
in  1866,  but  of  one  thing  I  am  certain — it  is  not  prac- 
ticable at  this  time.  A  short  lot  must  be  valued  according 
to  the  conditions  that  surround  it.  The  Hoffman  Rule 
gives  a  greater  value,  in  proportion,  to  a  short  lot  than 
to  a  standard  lot.  As  an  'illustration,  it  gives  a  value 
to  the  part  of  the  lot  25x50  of  $6,700  when  a  full  lot 
is  worth  but  $10,000.  In  a  tenement  house  district,  it 
is  scarcely  necessary  for  me  to  say,  a  part  of  a  lot 
25x50  cannot  be  adequately  improved  as,  under  the  Tene- 
ment House  Law,  a  rear  yard  with  a  depth  of  at  least 
12  feet  is  required.  There  are  a  number  of  other  in- 
stances throughout  the  city  where  I  could  point  out  the 
impracticability  of  these  rules. 

Interior  Lots 

It  is  always  a  difficult  matter  to  fix  the  value  of 
interior  property.  By  interior  property  I  mean  such 
property,  situated  in  the  centre  of  a  block,  as  has  no 
ingress  or  egress.  There  was  a  recent  case  tried  in  the 
Borough  of  Manhattan,  in  which  no  decision  has  been 
reached,  of  a  triangular  plot  in  the  rear  of  the  center 
line  of  the  block  connecting  with  two  lots  fronting  on 
the  street.  The  owner  claimed  that  by  reason  of  this 
connection  with  the  street,  which  was  the  more  prominent 
of  the  two  streets,  that  the  value  given  to  the  interior  plot 
should  be  of  the  same  value  as  that  of  the  value  on  the 
prominent  street.  To  illustrate  more  clearly,  let  us 
suppose  the  owner  owned  two  lots  on  23rd  Street,  each 

157 


Practical  Real  Estate  Methods 

100  feet  deep,  and  a  triangular  plot  in  the  rear,  the 
point  of  which  reached  nearly,  but  not  quite,  to  22nd 
Street.  The  contention  of  the  owner  was  that  this  tri- 
angular portion  should  be  given  the  value  of  the  23rd 
Street  property  by  reason  of  its  connection  with  it.  I 
took  the  other  side  of  the  question  and  claimed  that 
the  triangular  portion  should  only  receive  value  in  pro- 
portion to  the  22nd  Street  lots.  Had  this  triangular 
portion  no  ingress  or  egress  whatsoever,  I  would  have 
appraised  it  as  interior  property  and  would  probably 
have  deducted  in  proportion  one-third  of  the  22nd  Street 
value  had  it  not  been  for  this  connection  on  23rd  Street. 
While  I  was  not  willing  to  value  the  property  as  23rd 
Street  property,  still,  having  in  mind  its  connection  with 
23rd  Street,  I  allowed  full  22nd  Street  value,  although 
it  had  no  frontage  on  that  street. 

Three  Classes  of  Testimony 

There  are  three  divisions  of  expert  testimony,  as  fol- 
lows: 

First:  Condemnation  proceedings. 

Second:  Certiorari  proceedings  for  the  reduction  of 
taxes. 

Third:  Court  proceedings  to  determine  the  value  of 
property  of  lunatics,  infants  and  other  Court  charges. 

Consequential  Damage 

Now  taking  up  the  first  of  these  items  I  would  call  at- 
tention to  the  fact  that  one  of  the  most  difficult  problems 
of  condemnation  proceedings  is  that  of  consequential 
damage.  Consequential  damage  arises,  say,  in  a  plot  of 

158 


Expert  Testimony 

ten  lots  in  one  ownership,  five  on  each  street,  when  for 
some  purpose  eight  of  these  lots  have  been  taken,  leav- 
ing two  lots,  one  on  each  street.  Manifestly  the  value  of 
these  two  lots  remaining  is  not  nearly  so  great  in  pro- 
portion as  the  value  when  in  a  plot,  as  they  are  not  so 
susceptible  of  improvement.  The  same  case,  of  course, 
would  apply  to  property  that  is  improved  where  a  part 
of  a  building  is  taken ;  the  remaining  part  of  the  building 
often  is  not  as  valuable  in  proportion  as  it  was  before 
part  of  it  was  destroyed. 

One  of  the  most  interesting  cases  along  this  line  that 
I  have  had  confront  me  was  that  of  several  inside  lots 
where  a  proceeding  for  widening  of  an  avenue  necessi- 
tated taking  some  of  the  lots,  a  portion  of  the  inside  lots 
thus  becoming  a  corner.  The  question  then  arose  as  to 
the  measure  of  damage  sustained  by  reason  of  taking  this 
property.  The  owner's  experts  claimed  that  he  was  en- 
titled to  the  full  value  of  the  property  taken,  while,  on 
the  other  hand,  I  first  fixed  the  value  of  the  property  at 
the  time  of  the  commencement  of  the  condemnation  pro- 
ceedings. I  had  maps  drawn  showing  that  while  the 
condemnation  proceeding  would  take  part  of  the  inside 
property,  it  would  leave  the  owner  with  a  prominent  cor- 
ner, thus  obtaining  by  condemnation  what  he  could  not 
obtain  by  purchase,  as  he  had  been  unable  to  buy  the 
corner  plot.  In  addition,  he  gained  a  very  wide  avenue 
front  for  his  property,  and  where  the  neighborhood  had 
been  inactive  the  improvement  greatly  enhanced  the  prop- 
erty for  business.  In  view  of  this  change  of  situation,  I 
valued  the  remainder  of  the  property  at  a  great  deal  more 
in  proportion  than  I  had  the  original  property.  I  then 
deducted  the  value  of  the  remainder  of  the  property  from 
the  original  value  of  the  entire  property,  the  difference,  in 

159 


Practical  Real  Estate  Methods 

my  opinion,  being  the  measure  of  damage  sustained  by 
the  owner.  This  theory  is  supported  somewhat  by  the 
Charter  of  the  City  of  New  York  (Section  822),  which 
provides  for  this  method  of  fixing  damages  in  acquiring 
water-front  property,  and  why  it  should  not  apply  to 
other  properties  I  cannot  see. 

Water-front  Property 

It  has  been  the  policy  of  the  city  for  a  number  of  years 
past  to  acquire  water-front  property,  and  as  it  is  almost 
invariably  acquired  by  condemnation,  you  might  be  called 
upon  as  an  expert  to  testify  as  to  its  value.  The  value 
of  the  upland  is  not  so  difficult  to  determine,  due  weight 
being  given  to  its  contiguity  to  the  water  front.  The 
land  under  water  is  more  difficult  to  appraise,  and  neces- 
sitates a  study  of  the  grant  under  which  the  riparian 
rights  were  acquired.  The  value  depends  very  much 
upon  the  amount  of  improvement  necessary  by  the  gran- 
tee before  he  can  avail  himself  of  the  privileges  of  the 
grant.  The  value  of  a  bulkhead  is  not  difficult  to  estab- 
lish. The  Charter  of  the  City  of  New  York  (see  Section 
859)  provides  for  the  amount  of  wharfage  and  dockage 
which  shall  be  received,  and  also  provides  for  the  number 
of  boats  that  can  lie  at  any  wharf  at  one  time,  so  that 
these  facts  being  given,  it  is  merely  a  question  of  how 
much  the  bulkhead  can  earn.  However,  the  grant  itself, 
as  I  have  stated,  is  the  governing  factor  in  cases  where 
riparian  rights  are  involved. 

Leaseholds 

The  value  of  a  lease  or  leasehold  very  often  enters  into 
condemnation  proceedings.  To  fix  the  value  of  a  lease  or 

160 


Expert  Testimony 

leasehold  is  very  difficult  and  must  be  governed  by  the 
conditions  and  terms  under  which  the  lease  is  held.  There 
is  a  rule  for  appraising  leaseholds  which  I  think  is  fairly 
well  established.  This  rule  is : 

Capitalize  the  value  of  the  leasehold  property  at  the 
time  of  the  execution  of  the  lease  on  the  basis  of  the 
rental  at  four,  five  or  six  per  cent,  as  the  case  may  be. 
Ascertain  the  fee  value  of  the  property  at  the  present  time, 
the  difference  between  the  two  signifying  the  difference 
in  the  fee  value.  Calculate  on  a  four,  five  or  six  per  cent 
per  annum  basis,  as  the  case  may  be,  on  the  difference  in 
the  fee  values  for  the  unexpired  term  of  the  lease,  and 
the  result  will  be  the  value  of  the  unexpired  term  of  the 
lease. 

Condemnation  Proceedings 

In  condemnation  proceedings  you  will  often  be  re- 
quired to  testify  as  to  the  damage  caused  by  the  right  of 
way  through  property  such  as  a  railroad  over  the  prop- 
erty or  a  subway  under  the  property  or  a  damage  caused 
by  the  raising  or  lowering  of  the  grade  of  a  street.  It 
would  be  impossible  to  point  out  any  specific  rules  gov- 
erning these  cases,  as  each  one  of  them  has  to  be  fig- 
ured in  accordance  with  the  conditions  that  surround 
them. 

Condemnation  proceedings  are  for  the  most  part  ac- 
quirements by  the  city  for  its  own  use,  or  by  large 
corporations  contemplating  semi-public  improvements.  In 
appearing  in  these  proceedings  you  should  bear  in  mind 
that  owners  whose  property  is  to  be  acquired  will  make 
every  effort  to  take  advantage  of  the  necessity  of  the 
purchaser  and  will  almost  invariably  endeavor  to  procure 

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Practical  Real  Estate  Methods 

prices  much  in  excess  of  the  value.  On  the  other  hand, 
it  should  be  borne  in  mind  that  the  owner  may  suffer 
extraordinary  damage  by  reason  of  the  forced  sale  of  his 
property,  and  a  more  liberal  allowance  should  be  made 
in  these  proceedings  than  under  ordinary  circumstances. 
If  you  are  appearing  for  those  condemning  the  property, 
you  will  find  it  much  better  to  make  a  liberal  allowance 
than  to  appear  to  lower  the  value,  for  the  Commissioners 
will  be  aware  of  the  hardship  that  it  often  entails  in 
taking  property  without  the  consent  of  the  owner.  In 
fact,  it  is  often  taken  despite  his  protests. 

Tax  Proceedings 

The  next  form  of  expert  testimony  is  that  of  certiorari 
proceedings  for  the  reduction  of  taxes.  Up  to  the  year 
1903,  it  was  a  popular  fallacy  that  property  in  the  city 
of  New  York  was  assessed  at  two-thirds  of  its  actual 
value.  Assessors,  commencing  the  first  Monday  of  Janu- 
ary, 1903,  were  supposed  to  assess  property  at  its  full 
Talue.  Immediately  afterwards  a  law  was  passed  re- 
quiring, beginning  in  January,  1904,  the  assessor  to  divide 
his  assessment  between  land  and  building.  Then,  indeed, 
did  chaos  reign  in  the  tax  office.  Gradually  since  that 
time  conditions  have  improved,  but  the  assessors  for  the 
most  part  are  not  versed  in  values,  nor  do  they  have  the 
proper  time  in  which  to  do  their  work.  The  consequence 
has  been  that  many  actions  have  been  brought  to  reduce 
the  assessments,  sometimes  unjustly,  the  tendency  of 
everyone  being  to  feel  himself  overtaxed.  It  is  the  duty 
of  the  real  estate  expert  employed  in  these  cases  first  to 
ascertain  the  value  of  the  property,  and  then  to  decide  if 
the  proceedings  should  be  continued  or  not.  This,  while 

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it  entails  a  large  amount  of  labor,  is  not  necessarily  diffi- 
cult. But  there  often  arises  a  question  of  inequality  of 
taxation  which  is  much  more  difficult  to  solve.  I  have 
examined  and  appraised  something  over  one  thousand 
pieces  of  property  in  the  Borough  of  Manhattan,  and 
from  my  appraisements  of  these  properties,  scattered 
throughout  the  borough,  I  am  of  the  opinion  that  in  the 
year  1903,  property  was  assessed  at  77.5%  of  its  market 
value;  in  1904,  73-8%;  in  1905,  71.5%;  in  1906,  744%- 
An  unexpected  corroboration  of  this  fact  occurred  in 
the  recent  appraisement  of  the  property  of  the  Consoli- 
dated Gas  Company,  when  I  appraised  seventeen  hun- 
dred tax  lots  throughout  the  Borough  of  Manhattan.  At 
the  time  of  my  appraisement  of  these  properties,  I  did 
not  look  into  the  matter  of  their  assessed  valuation.  It 
was  a  curious  coincidence,  therefore,  that  when,  during 
my  examination,  the  question  arose,  in  an  attempt  to  dis- 
credit my  testimony,  as  to  the  ratio  between  my  appraisal 
and  the  assessed  valuation,  it  was  found  upon  comparison 
that  this  ratio  was  about  75%.  This  was  a  direct  sub- 
stantiation of  my  statement  that  the  properties  were 
assessed  at  74.4%  of  their  valuation  in  the  year  1904. 

Court  Proceedings 

The  last  division  of  expert  testimony  is  that  as  to  the 
value  of  real  estate  in  the  matter  of  the  sale  of  property 
of  a  lunatic  or  an  infant  which  has  to  be  confirmed  by 
the  court.  This  does  not  require  extensive  preparation, 
so  I  will  not  detain  you  with  that,  although  an  expert 
should  not  be  less  careful  or  conscientious  in  these  cases. 
However,  the  examination  need  not  be  as  extensive,  as 
cross-examination  is  generally  perfunctory. 

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Practical  Real  Estate  Methods 

Capitalization 

As  correct  appraisal  is  necessarily  the  basis  of  expert 
testimony,  I  desire  to  call  your  attention  to  the  funda- 
mental principle  of  appraising,  and  that  is  capitalization. 
Capitalization  is  the  basic  principle  of  valuing  real  prop- 
erty. If  the  land  be  unimproved,  it  is  a  question  of  the 
value  of  the  land  and  the  character  of  the  building  that 
the  neighborhood  justifies,  the  cost  of  production,  and 
the  income  the  property  will  produce  when  adequately 
improved.  If  the  property  be  improved,  the  first  thing  to 
be  done  in  arriving  at  the  value  is  to  fix  the  value  of  the 
land  and  then  capitalize  the  property  on  the  basis  of  its 
rental  value.  The  difference  between  the  value  of  the 
land  and  the  gross  amount  as  capitalized  from  the  rental 
will  give  you  the  value  of  the  building.  Assuming  the 
land  to  be  worth  $25,000  and  the  building — a  tenement 
— rents  for  $6,500,  I  would  capitalize  the  property  on  a 
basis  of  10%,  or  $65,000,  and  deducting  $25,000  as 
the  value  of  the  land,  leave  the  value  of  the  building 
$40,000.  Of  course,  when  I  make  10%  the  basis  of  cal- 
culation, I  do  not  mean  that  this  holds  in  all  cases.  It 
would  depend  on  the  character,  kind  and  condition  of  the 
building,  whether  it  were  new  or  old,  whether  it  were  a 
loft  building,  a  residence,  office  building  or  apartment 
house,  its  location  and  surroundings,  and  as  to  whether 
it  was  an  adequate  improvement  or  not. 

While  I  have  said  that  capitalization  is  the  basic  prin- 
ciple of  valuing  real  property,  I  do  not  wish  to  be  under- 
stood as  saying  that  it  is  the  only  means  of  ascertaining 
values,  but  in  my  opinion  it  is  the  most  accurate  way. 
It  is  seldom  that  the  structural  cost  of  a  building  adds 
that  amount  to  the  market  value  of  the  land.  In  other 

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Expert  Testimony 

words,  the  land  value  being  fixed,  what  will  a  purchaser 
pay  for  the  improvement?  As  an  illustration  that  cost 
of  construction  will  not  add  that  amount  to  the  value 
of  the  land,  let  us  assume  that  a  building  similar  to  the 
Waldorf-Astoria  be  erected  at  the  corner  of  Second  Ave- 
nue and  34th  Street  instead  of  Fifth  Avenue  and  34th 
Street.  It  does  not  admit  of  discussion  that  the  market 
value  of  the  building  would  be  very  greatly  reduced 
no  matter  what  may  have  been  the  cost  of  construction. 

Ratio  of  Rental  Value 

The  average  ratio  of  rental  to  fee  value  differs ;  gener- 
ally, in  an  office  building  it  is  8%  gross,  in  an  elevator 
apartment  house  12%,  in  a  flat  or  tenement  10%,  in  a 
residence  7%.  Of  course,  these  ratios  may  vary.  There 
are  many  cases  where  there  is  no  revenue,  as  in  the  case 
of  residences  occupied  by  the  owners.  It  is  then  the 
duty  of  the  appraiser  to  ascertain  the  rental  of  similar 
buildings  in  the  same  location.  After  long  experience  as 
an  appraiser  it  is  not  difficult  to  appraise  the  value  of  a 
building  or  buildings  from  general  knowledge,  even  if 
the  rental  value  be  unobtainable.  Sometimes  the  value 
can  be  arrived  at  by  a  certain  cost  per  cubic  foot  on  dif- 
ferent classes  of  buildings,  but  I  do  not  consider  this  is 
a  good  method  of  appraising,  and  would  only  advise  its 
use  when  it  cannot  be  avoided,  for  it  is  a  return  to  a 
structural  value,  and  I  think  should  only  be  adopted  where 
the  building  is  used  for  a  specific  purpose  and  the  rental 
value  cannot  be  determined. 

In  conclusion,  let  me  say  that  there  is  no  branch  of  our 
profession  in  which  you  will  be  more  criticised  or  your 
motives  more  misjudged  than  that  of  expert  appraising. 

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Practical  Real  Estate  Methods 

Yet,  if  you  will  arm  yourselves  in  the  way  that  I  have 
outlined  and  appraise  conscientiously,  never  allowing 
yourself  to  be  guided  by  the  opinion  of  an  owner  or  his 
attorney,  and  will  take  only  cases  in  which  you  are  allowed 
absolute  control  as  to  values,  you  will  forestall  much  criti- 
cism and  at  least  have  the  approval  of  a  clear  conscience. 


166 


HOW  PROPERTY  IS  ASSESSED 

LAWSON  PURDY 

Effective  Tax  Boards— Block  System— Field  Work  of 
Assessors — Traffic  as  a  Factor  of  Value — Corner 
Lots — Using  Floor  Area — Correcting  Assessments- 
Previous  Sales— St.  Paul  Plan 

THE  precise  form  of  the  organization  of  the  assess- 
ing department  of  a  city  must  depend  more  or 
less  upon  the  size  of  the  city,  but  the  principles 
which  should  underlie  the  organization  are  the  same  in 
every  city  and  in  country  districts  as  well. 

The  administrative  head  of  the  assessing  department 
should  be  appointed  and  not  elected,  and  should  be  re- 
moved at  the  pleasure  of  the  appointing  power.  Asso- 
ciated with  the  administrative  head  of  the  department 
there  should  be  a  sufficient  number  of  commissioners, 
who,  together  with  him,  shall  act  as  a  board  of  review 
and  pass  on  all  questions  which  should  properly  be  sub- 
mitted to  the  board  rather  than  to  a  single  official.  In 
small  cities  a  board  of  three  members  would  be  sufficient, 
and  two  of  them  might  receive  a  much  smaller  compensa- 
tion than  the  administrative  head  of  the  department,  as 
their  duties  would  probably  be  confined  to  the  reviewing 
work,  which  would  take  only  a  few  weeks  in  the  course  of 
a  year.  In  large  cities  the  number  may  be  increased  as 
necessity  requires.  In  the  City  of  New  York  there  are 

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Practical  Real  Estate  Methods 

seven  members  in  the  present  board,  and  the  number  is 
sufficient  and  not  too  large  to  be  effective. 

The  members  of  this  board,  including  the  administra- 
tive head,  should  be  appointed  and  not  elected,  as  it  is 
desirable  that  there  should  be  as  few  persons  as  possible 
to  be  elected  in  order  that  the  issues  presented  to  voters 
shall  be  simple  and  that  responsibility  may  be  centered. 
Objection  is  sometimes  made  against  giving  the  appoint- 
ing power  the  option  to  remove  at  will  any  appointee, 
on  the  ground  that  certain  positions  are  essentially  non- 
political,  and  appointment  for  a  term  of  years  frees  the 
official  from  undue  influence;  but  this  system  deprives 
the  voters  of  control  over  their  own  officials  by  dividing 
responsibility,  and  it  is  the  essence  of  popular  government 
that  the  voters  should  at  all  times,  or  at  frequent  inter- 
vals, exercise  the  most  effective  and  direct  control  over 
all  public  servants. 

The  assessors  who  perform  the  actual  work  of  ap- 
praisal should  give  their  entire  time  to  their  work  and 
be  engaged  in  no  other  business.  They  should  be  selected 
as  the  result  of  a  competitive  examination,  which  should 
be  designed  with  care  to  ascertain  their  fitness  for  the 
actual  duties  they  are  called  upon  to  perform;  when 
appointed,  they  should  be  removed  only  for  cause  and 
after  a  hearing.  The  assessors  should  be  sufficient  in 
number  so  that  no  one  man  should  have  more  than 
10,000  parcels  of  real  estate  to  assess.  In  a  sparsely 
settled  territory  where  the  parcels  of  property  are  large, 
and  in  congested  centers  where  the  parcels  are  of  irregu- 
lar shape  and  values  are  high,  the  number  of  parcels 
which  can  properly  be  assigned  to  any  one  man  may  not 
be  more  than  about  4,000.  Each  assessor  should  be 
assisted  by  a  clerk  appointed  after  competitive  examina- 

168 


How  Property  is  Assessed 

tion  and  removable  only  for  cause.  In  large  cities  cer- 
tain of  the  assessors  may  be  assigned  to  executive  work 
and  a  further  force  of  clerks  may  be  required  in  addition 
to  the  one  clerk  assigned  to  each  field  assessor. 


Block  System 

In  some  cities  and  in  nearly  all  country  towns  real 
estate  assessment  rolls  are  still  arranged  alphabetically 
instead  of  geographically,  and  in  most  country  towns  the 
assessment  of  the  real  estate  of  residents  depends  for  its 
validity  upon  the  correct  designation  of  the  owner.  This 
system  unnecessarily  injects  the  personal  element,  occa- 
sionally invalidates  the  assessment,  and  worst  of  all,  ren- 
ders comparison  of  assessed  values  exceedingly  difficult. 
Moreover,  the  alphabetical  arrangement  depending  upon 
the  correct  designation  of  the  names  of  owners  requires 
a  separate  roll  or  a  different  method  for  the  assessment 
of  the  property  of  residents  and  non-residents.  Alto- 
gether, the  alphabetical  system  has  nothing  to  commend 
it,  unless  it  be  a  necessity  caused  by  the  absence  of  proper 
maps. 

Accurate  maps  are  the  foundation  of  a  good  system  of 
assessing  real  estate.  The  maps  should  be  prepared  in 
accordance  with  the  block  system,  similar  to  that  in  the 
City  of  New  York.  This  system  is  applicable  to  both 
city  and  country.  An  example  of  its  use  in  country  dis- 
tricts and  cities  as  well  may  be  found  in  the  Cadastral 
System  in  the  Province  of  Quebec.  The  entire  province 
is  divided  into  cadastres,  the  boundaries  of  which  are  un- 
changeable. Within  each  cadastre  the  lot  numbers  are 
changed  as  necessity  requires.  The  system  in  the  City  of 
New  York  was  first  established  to  provide  properly  for 

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Practical  Real  Estate  Methods 

the  recording  and  indexing  of  instruments  affecting  land, 
by  Chapter  166  of  the  Laws  of  1890.  This  system  was 
established  for  the  assessment  of  real  estate  by  Chap- 
ter 542  of  the  Laws  of  1892. 

Briefly  described,  the  block  system  of  assessment  in 
the  City  of  New  York  is  as  follows:  A  land  map  of  the 
city  was  prepared  under  the  direction  of  the  commission- 
ers of  taxes  and  assessments,  upon  which  was  exhibited  in 
sections  and  section  numbers,  and  block  and  block  num- 
bers the  separate  lots  or  parcels  of  land  taxed  within  each 
of  the  city  blocks.  Each  lot  or  parcel  of  land  shown 
on  the  map  is  designated  by  a  lot  number.  The  lot 
numbers  commence  in  each  block  with  Number  I  and 
continue  numerically  upwards  for  as  many  lots  as  are 
comprised  within  each  block.  The  word  "block"  as  used 
in  this  system  designates  a  plot  or  parcel  of  land  wholly 
embraced  within  continuous  lines  of  streets  or  streets 
and  water  front,  and  may  be  more  than  a  city  square,  but 
generally  does  not  exceed  200,000  square  feet  in  area. 
Blocks  are  numbered  from  number  one  consecutively 
upward.  The  numbers  never  change  and  the  boundaries 
never  change.  The  city  is  further  divided  into  sections 
the  boundaries  of  which  are  unchanging,  and  which  are 
numbered  consecutively  from  one  up ;  each  section  is 
about  three  or  four  square  miles  in  area. 

On  the  assessment  rolls  the  blocks  appear  consecu- 
tively and  within  each  block  the  lots  are  placed  in  ac- 
cordance with  their  location  on  the  streets,  commencing 
at  one  corner  and  proceeding  continuously  along  each  side 
of  the  squares  which  constitute  the  block.  Any  lot  may 
be  located  rapidly  and  certainly,  either  on  the  assessment 
roll  or  on  the  map.  For  the  convenience  of  the  assessors, 
the  maps  are  bound  in  volumes  of  suitable  size  with  a 

170 


How  Property  is  Assessed 

key  map  in  the  front;  the  scale  of  the  key  map  being 
from  300  to  700  feet  to  the  inch  and  the  scale  of  the 
official  map  being  50  feet  to  the  inch. 

The  block  system  has  not  yet  been  extended  to  cover 
the  entire  City  of  New  York,  but  it  is  being  extended  as 
rapidly  as  the  work  can  be  done  and  the  street  system  be- 
comes sufficiently  permanent  to  establish  unchangeable 
block  lines.  In  the  territory  not  yet  covered  by  the  block 
system  the  maps  are  temporary  and  are  called  tentative 
maps.  As  these  maps  cover  territory  held  in  large  par- 
cels, much  of  it  farm  land,  the  scale  somewhat  varies, 
being  from  80  to  200  feet  to  the  inch.  So  far  as  prac- 
ticable, however,  the  same  system  applies  in  the  territory 
only  tentatively  mapped.  Every  lot  is  numbered,  and 
its  position  is  designated  by  a  number  on  the  map  and  by 
ward,  plot  and  map  numbers.  The  length  of  all  boun- 
dary lines  is  shown  on  the  maps  in  feet  and  inches,  and 
on  valuable  lots  of  irregular  shape  the  area  is  shown  in 
square  feet;  on  larger  parcels  the  area  is  shown  in  lots 
or  acres. 

Field  Work 

Beside  the  map  books,  each  assessor  should  have  field 
books  containing  columns  for  the  final  assessed  values 
for  several  years;  a  wide  column  for  remarks,  and  col- 
umns showing  the  name  of  the  owner,  if  known,  the  size 
of  the  lot,  the  number  of  houses  on  the  lot,  the  size  of 
each  house,  the  number  of  stories  in  height,  the  street 
number  and  the  lot  number.  Above  each  block  should 
appear  section  and  block  numbers,  and  the  number  of 
the  volume  to  correspond  with  the  number  of  the  volume 
of  the  assessment  roll.  In  New  York  each  section  is 
divided  into  volumes  and  the  volumes  are  numbered  from 

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Practical  Real  Estate  Methods 

one  up  consecutively  for  each  section.  The  volume  num- 
bers change  from  time  to  time  as  it  may  be  necessary  to 
increase  the  number  of  books  in  which  the  record  is  made. 

Part  of  the  office  system  should  be  the  preservation  of 
all  records  giving  evidence  of  value.  The  card  index 
system  is  probably  the  most  convenient,  and  this  should 
show,  as  nearly  as  may  be,  all  conveyances  with  the  con- 
sideration, and  if  the  number  is  inadequate,  a  record 
should  be  kept  of  all  mortgages,  contracts  of  sale  and 
more  important  leases.  In  the  remarks  column  of  his 
field  book  the  assessor  should  set  down  such  matters  of 
record  and  any  further  information  in  regard  to  value 
that  he  himself  can  secure.  On  both  the  assessment  roll 
and  record  book  there  should  be  a  separate  column  for 
the  value  of  land,  exclusive  of  improvements. 

When  the  assessor  is  equipped  with  map  and  field 
book  filled  with  all  available  data,  he  should  first  deter- 
mine the  value  of  the  land  per  front  foot  for  the  unit 
of  depth,  which  in  New  York  is  100  feet.  It  will  gen- 
erally be  found  most  convenient  to  set  down  this  unit 
value  of  land  on  the  key  map  in  the  map  book.  Having 
determined  the  front  foot  value  of  land  100  feet  deep, 
the  actual  value  of  each  lot  is  very  quickly  ascertained. 
When  lots  are  irregular  in  width  and  depth,  when  lots 
are  shorter  or  deeper  than  100  feet,  the  value  must  be 
ascertained  in  accordance  with  a  scale  which  experience 
shows  is  suitable  for  the  particular  city.  It  is  always  the 
case  that  land  near  a  street  is  worth  more  than  land  fur- 
ther from  it,  for  all  city  land  is  valued  in  proportion  to 
the  character  of  the  street  on  which  it  fronts.  A  city 
block  may  be  defined  as  a  parcel  of  land  entirely  sur- 
rounded by  streets,  and  the  nature  of  this  street  frontage 
determines  the  value. 

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How  Property  is  Assessed 

Importance  of  Traffic 

The  flood  of  travel  along  the  streets  surrounding  the 
block  is,  in  the  main,  what  determines  the  value  of  the 
land  within  the  block.  The  larger  the  stream  of  travel, 
the  greater  the  land  value.  This  is  particularly  true  in 
the  business  portion  of  the  city.  In  residence  and  manu- 
facturing districts,  it  is  not  so  much  the  stream  of  travel 
along  the  streets  surrounding  the  block  as  it  is  the  short, 
direct  connection  by  means  of  the  street  in  front  of  the 
block  with  the  main  streams  of  travel  along  the  main 
streets.  The  similarity  of  the  streets  of  a  city  to  a  river 
system  consisting  of  a  main  stream  and  its  branches  all 
the  way  back  to  the  little  brooks  and  rivulets  is  striking, 
and  if  it  be  borne  in  mind,  the  problem  of  determining 
land  values  is  much  simplified. 

Corner  Lots 

Corners  are  always  more  valuable  than  interior  lots, 
and  the  relative  value  of  a  corner  to  an  interior  lot  de- 
pends upon  the  value  of  the  two  streets  on  which  the 
corner  lot  fronts.  The  greatest  increase  for  a  corner  lot 
is  at  the  intersection  of  two  streets  of  equal  value,  and 
the  increase  for  the  corner  diminishes  from  this  high 
point  to  a  point  where  one  of  the  intersecting  streets 
may  be  regarded  as  adding  no  value  in  excess  of  the 
value  of  an  easement  of  light  and  air.  Generally,  it  will 
be  found  that  the  increment  due  to  a  corner  position  ex- 
tends 100  feet  in  each  direction  from  the  corner.  The 
extent  of  the  corner  influence  and  the  ratio  of  increase 
should  be  determined  in  view  of  the  conditions  in  the 
particular  city  from  the  best  evidence  obtainable,  and 

173 


Practical  Real  Estate  Methods 

appropriate  basic  tables  or  scales  should  be  prepared  for 
the  guidance  of  the  assessors.  It  will  probably  be  found 
that  these  scales  vary  but  slightly  in  different  cities, 
probably  no  more  than  in  different  parts  of  the  same 
city.  When  the  scale  is  once  established  and  popular- 
ized, it  not  only  states  a  present  fact,  but  to  a  large 
extent  determines  future  values,  because  land  is  bought 
and  sold  on  the  basis  of  value  established  by  the  scale. 
This  fact  is  shown  by  the  experience  of  New  York,  where 
for  many  years  the  Hoffman  Rule  has  been  in  common 
use  for  determining  the  relation  of  the  value  of  part  of 
a  lot  to  a  whole  lot.  Although  the  Hoffman  Rule  is 
crude,  it  has  undoubtedly  a  large  influence  in  determin- 
ing the  actual  price  for  short  lots. 


Factors  of  Value 

When  the  assessor  has  determined  and  recorded  the 
value  of  the  land  exclusive  of  improvements  on  each  lot 
in  his  district,  or  in  a  section  of  his  district,  he  will 
proceed  to  determine  the  value  of  the  improvements.  To 
secure  uniform  assessment  of  buildings  and  other  im- 
provements, it  is  necessary  to  establish  what  may  be 
called  factors  of  value.  Architects  and  builders  gener- 
ally estimate  the  cost  of  a  building  by  its  cost  per  cubic 
foot  of  contents,  counting  from  the  bottom  of  the  exca- 
vation to  the  top  of  the  building.  This  system  is 
impracticable  for  assessors  because  it  is  too  complicated 
and  requires  information  not  readily  ascertained.  It  is 
impracticable  for  the  assessor  to  obtain  the  height  of 
all  buildings,  to  say  nothing  of  rinding  out  how  deep 
they  are  below  the  sidewalk. 

174 


How  Property  is  Assessed 


Using  Floor  Area 

It  is  practicable  to  determine  with  substantial  accuracy 
the  number  of  square  feet  of  floor  surface  on  each  floor 
and  the  number  of  floors,  because  the  size  of  a  building 
can  be  ascertained  by  measurement  or  from  the  build- 
ing records.  In  the  case  of  many  buildings,  the  size  is 
almost  unvarying  for  the  class  to  which  they  belong. 
There  are,  in  fact,  comparatively  few  classes  of  buildings, 
and  it  will  be  found  easy  to  determine  accurate  factors 
of  cost  for  each  class.  For  example,  in  the  City  of  New 
York  office  buildings  are  rarely  to  be  found  to  exceed 
$8  per  square  foot  of  floor  surface,  and  tenements  built 
under  the  new  law,  six  stories  high,  will  not  vary  very 
much  from  $1.40  per  square  foot  of  floor  surface.  In 
determining  these  factors  it  is  convenient  to  include  as 
part  of  the  building  area  the  area  of  interior  courts  and 
wells,  which  are  generally  uniform  for  each  class  of 
buildings.  In  the  case  of  an  office  building,  for  example, 
it  is  usually  the  fact  that  all  of  the  land  is  covered  by 
the  building  that  can  be  covered,  and  the  entire  area  of 
the  lot  may  be  regarded  as  the  area  of  a  single  floor. 
The  amount  of  the  factor  is,  of  course,  fixed  in  accord- 
ance with  the  method  determining  the  area. 

In  the  case  of  a  tenement  house  built  under  the  pres- 
ent tenement  house  law  in  New  York,  large  interior 
courts  must  be  left  open,  but  it  is  convenient  to  take 
the  extreme  depth  of  the  building  multiplied  by  its  width 
as  equivalent  to  the  floor  area.  In  using  these  factors 
for  the  value  of  buildings  the  assessor  has  ample  oppor- 
tunity for  the  exercise  of  judgment,  as  the  factor  will 
show  the  cost  of  reproduction,  and  a  proper  reduction 

175 


Practical  Real  Estate  Methods 

must  be  made  for  depreciation  when  the  building  is  old, 
or  for  unsuitability  when  the  building  is  no  longer  an 
adequate  improvement  of  the  site.  In  most  of  our  cities 
population  is  increasing  so  rapidly,  and  business  sec- 
tions press  so  fast  upon  residential  sections,  that  the 
suitable  character  of  the  building  for  the  site  on  which 
it  stands  is  one  of  the  most  important  considerations  in 
determining  its  value.  It  is  no  uncommon  thing  in  the 
City  of  New  York  for  buildings  in  perfect  repair,  which 
would  last  for  100  years,  to  be  torn  down  to  make 
way  for  more  modern  structures.  Such  buildings  add 
little  or  nothing  to  the  value  of  the  land,  and  their  cost 
of  reproduction  is  no  measure  of  present  value. 

Correcting  Assessments 

It  is  a  fundamental  principle  of  our  law  that  notice 
to  taxpayers  is  necessary  for  a  valid  assessment,  and 
there  must  be  an  opportunity  to  apply  for  correction. 
There  is  a  notion  quite  commonly  entertained  and  abso- 
lutely erroneous,  that  a  board  to  hear  complaints  can  be 
so  constituted  that  it  can  secure  a  fair  assessment.  No 
board  for  the  correction  or  review  of  assessments  has 
ever  existed  that  can  do  very  much  to  correct  a  poor 
assessment.  In  the  City  of  New  York  there  are  over  480,- 
ooo  separately  assessed  parcels  of  real  estate.  The  great- 
est number  of  applications  for  correction  since  the  con- 
solidation of  the  city  has  been  about  10,000,  or  only  a 
little  over  two  per  cent  of  the  whole  number.  With  so 
large  a  number  of  applications  as  10,000,  it  is  almost 
physically  impossible  to  give  to  each  application  the  at- 
tention it  deserves,  and  this  statement  is  made  with  full 
knowledge  of  the  fact  that  not  more  than  one  application 


How  Property  is  Assessed 

in  five  has  any  merit.  If  all  the  10,000  had  merit,  and  all 
could  be  acted  upon  with  sufficient  time  and  intelligence, 
there  would  then  be  corrections  as  to  only  two  per  cent 
of  the  total  number  of  assessments.  In  spite  of  the  fact 
that  a  board  of  review  has  very  little  value  as  a  means 
of  correcting  a  poor  assessment,  it  may  have  very  great 
value  indeed  in  performing  the  most  important  function 
of  securing  a  better  assessment  the  following  year  if  the 
board  of  review  is  composed  of  the  same  men  who  direct 
the  work  of  the  assessors.  In  some  cities,  the  board  of 
review  has  nothing  to  do  with  the  assessment  they  are 
called  upon  to  correct,  and  the  experience  they  gain  is 
practically  thrown  away,  whereas  the  experience  gained 
in  hearing  complaints  and  passing  upon  objections  is 
of  the  utmost  value  to  those  who  direct  the  work  of 
making  the  next  assessment.  Where  the  assessing  de- 
partment has  a  single  administrative  head  or  is  directed 
by  a  board,  the  man  or  men  charged  with  administration 
should  be  members  of  the  board  of  review. 


Previous  Sales  as  Guides 

The  value  of  anything  which  can  be  reproduced  indefi- 
nitely can  never  long  exceed  its  cost  of  reproduction.  The 
value  of  land,  on  the  other  hand,  is  a  monopoly  or  scarcity 
value.  It  depends  upon  the  supply  and  demand.  The 
supply  cannot  be  increased,  and  the  demand  is  therefore 
the  changing  factor.  If  one  has  to  consider  the  value 
of  a  chair  or  a  table,  he  is  aided  by  the  knowledge  that 
it  can  be  reproduced  for  a  certain  sum,  but  to  ascertain 
the  value  of  land,  he  is  confined  to  the  inquiry  as  to  what 
other  people  think  it  is  worth  and  what  they  therefore 

177 


Practical  Real  Estate  Methods 

will  pay  for  it.  Each  particular  sale  of  land  is  merely 
evidence  of  what  certain  persons  think  the  land  was 
worth.  The  price  paid  may  have  been  influenced  by  con- 
siderations peculiar  to  the  particular  sale,  and  the  price 
paid  is  never  conclusive  evidence  of  value.  Sometimes 
a  man  is  pressed  for  ready  money,  and  sells  a  piece  of 
land  for  less  than  it  would  bring  if  more  time  had  been 
devoted  to  the  search  for  a  purchaser.  Sometimes  a  man 
desires  a  particular  site  to  enlarge  a  parcel  he  already 
owns  or  for  some  other  reason,  and  because  of  his  desire 
for  that  particular  site  he  is  compelled  to  pay  a  larger 
price  than  one  would  pay  who  merely  sought  a  piece  of 
land  of  like  location  and  character.  To  determine  the 
value  of  land  with  the  greatest  accuracy,  it  is  necessary 
to  secure  as  nearly  as  possible  the  opinion  of  value  of 
the  largest  number  of  persons  who  help  to  make  the 
market,  either  by  being  themselves  buyers  and  sellers  or 
the  advisers  of  buyers  and  sellers. 

In  view  of  these  conditions  the  greatest  problem  be- 
fore the  assessing  department  is  as  to  the  best  way  in  a 
given  time  and  place  to  secure  the  benefit  of  the  com- 
munity opinion  of  value.  It  is  obviously  necessary,  in 
the  first  place,  to  popularize  the  terms  used  in  expressing 
the  value  of  land.  If  one  man  says  the  value  of  land  so 
situated  is  so  much  per  square  foot  and  another  says  it 
is  so  much  per  front  foot,  and  one  man  uses  the  term 
front  foot  value  to  express  100  feet  deep,  and  another 
to  express  50  feet  deep,  it  is  obvious  that  there  is  no 
comparison  between  the  different  statements.  It  is  for 
this  reason  that  it  is  so  important  to  use  a  unit  which 
never  varies,  such  as  the  value  per  front  foot  100  feet 
deep.  Moreover,  this  value  must  have  reference  to  an 
inside  lot  and  not  a  corner,  for  it  is  the  value  per  front 

178 


How  Property  is  Assessed 

foot  100  feet  deep  of  an  interior  lot  on  each  of  the  con- 
necting streets  which  determines  the  value  of  a  corner. 


St.  Paul  Plan 

Different  methods  have  been  employed  in  various  cities 
to  secure  the  widest  expression  of  community  opinion  as 
to  the  value  of  land  for  the  guidance  of  the  assessing 
department  and  the  best  method  must  very  likely  be 
determined  with  reference  to  the  conditions  of  the  par- 
ticular city  at  the  given  time.  A  method  which  will  work 
admirably  in  a  city  of  100,000  inhabitants  may  be  im- 
practicable in  a  city  of  four  millions.  In  the  City  of  New 
York  for  the  last  five  years  the  assessed  value  of  real 
estate  has  been  published  by  sections  in  convenient  form. 
These  publications  have  been  quite  generally  bought  by 
persons  interested  in  real  estate,  but  the  extent  to  which 
this  method  has  contributed  to  the  expression  of  opinion 
in  regard  to  value  is  not  fully  satisfactory.  Some  years 
ago,  in  the  city  of  St.  Paul,  Mr.  William  A.  Somers 
invited  all  persons  interested  in  the  assessment  of  the 
city  to  attend  in  a  large  room  where  maps  of  the  city 
were  exhibited.  On  these  maps  the  value  per  front  foot, 
100  feet  deep,  was  set  down  on  each  side  of  every  block. 
Criticism  was  invited  of  those  unit  values.  As  a  result 
of  the  criticism  the  values  were  changed  until  they  were 
substantially  approved  by  practically  all  those  in  the  city 
who  had  a  well-informed  opinion  as  to  values.  The  as- 
sessment of  the  land  of  St.  Paul  that  year  represented 
the  consensus  of  opinion  of  those  who  knew  what  the 
land  in  St.  Paul  was  worth. 

This  same  method  was  tried  in  the  city  of  Cleveland 
with  a  view  to  securing  an  accurate  statement  of  the 

179 


Practical  Real  Estate  Methods 

value  of  land  in  the  city  for  the  purpose  of  aiding  the 
assessing  board  over  which  the  authorities  of  the  city  had 
no  direct  control.  The  experiment  in  Cleveland  aroused 
much  interest  and  is  said  to  have  been  a  success.  In 
cities  of  a  larger  size  it  might  be  difficult  or  impossible 
to  secure  the  necessary  co-operation  to  render  this  plan 
successful.  I  am  inclined  to  believe  that  in  many  cities 
the  best  plan  will  be  to  publish  maps  of  convenient  size 
showing  the  unit  value  per  front  foot,  100  feet  deep,  of 
the  land  on  all  sides  of  every  square,  and  wherever  the 
unit  may  change  on  the  side  of  any  square.  These  maps 
should  be  bound  in  pamphlets,  each  pamphlet  covering 
so  much  of  the  city  as  may  be  convenient.  The  maps  or 
map  pamphlets  should  then  be  distributed  to  those  best 
informed  in  regard  to  land  values  with  a  request  for 
criticism.  One  real  estate  broker  may  be  exceedingly 
well  informed  as  to  the  market  value  of  land  in  a  very 
small  section  of  the  city  and  may  know  comparatively 
little  of  values  outside  that  section.  Some  brokers  have 
records  of  great  value  covering  a  large  section  of  the 
city,  and  consequently  are  able  to  give  excellent  advice 
as  to  value  in  larger  sections.  If  sufficient  interest  could 
be  aroused  to  secure  the  co-operation  of  those  whose 
opinions  are  worth  consulting,  their  suggestions  might 
be  very  useful  to  the  assessors. 

To-day  in  the  City  of  New  York,  the  assessments, 
especially  in  certain  parts  of  the  city,  are  regarded  by 
those  best  informed  as  exceedingly  good  evidence  of 
value.  The  more  generally  assessments  are  regarded  as 
being  accurate,  the  more  would  those  assessments  tend 
in  themselves  to  establish  the  values  they  are  designed 
to  record.  If  confidence  is  established  in  the  work  of 
the  assessors  and  interest  in  their  work  is  extended  to 

180 


How  Property  is  Assessed 

a  larger  and  larger  number  of  people,  the  work  of  the 
assessors  will  constantly  improve  by  more  nearly  re- 
flecting the  consensus  of  community  opinion,  and  the 
assessments  themselves  will  tend  to  establish  and  de- 
termine the  opinion  of  the  community. 


MORTGAGE  LOANS  ON  REAL 
ESTATE 

G.  RICHARD  DAVIS 

Definition  of  Mortgage — The  Standpoint  of  the 
Lender — Guaranteed  Mortgages — Borrower's  Point 
of  View — Broker's  Position — Participating  Mortgages 
— Objections  Raised — Value  of  Plan 

A  MORTGAGE  on  real  estate  is  a  written  instrument — 
in  effect  a  deed  of  trust,  and  so  called  in  many 
States  of  the  Union — given  to  secure  the  repay- 
ment of  a  loan,  as  evidenced  by  the  bond  accompanying 
the  mortgage.  The  form  of  mortgage  commonly  in  use 
in  this  city  has  been  more  or  less  standardized  by  the 
title  insurance  companies,  and  other  large  investors.  It 
usually  contains  clauses  reciting  when  interest,  taxes 
and  assessments  should  be  paid;  fire  insurance,  receiver- 
ship, and  demolition  clauses ;  and  various  other  provisions 
for  the  protection  of  the  lender.  A  mortgage  is  a  valid 
lien  against  the  property  described  therein,  whether  re- 
corded or  not,  but  failure  to  record  the  mortgage  makes 
it  subordinate  to  any  lien  filed  or  other  recorded  claim 
against  the  same  property. 

As  first  mortgages  embody  all  the  principal  points  of 
value  in  a  discussion  of  mortgage  loans,  this  article  will 
be  confined  to  a  consideration  of  them  only. 

The  Lender's  Standpoint 

First  mortgages  are  a  most  desirable  form  of  invest- 
ment. Their  interest  return  is  higher  than  that  of  other 

182 


Mortgage  Loans  on  Real  Estate 

equally  high  class  securities,  and  their  non-fluctuating 
quality,  both  as  to  interest  and  principal,  commends 
them  at  all  times  as  a  conservative  form  of  investment. 
The  objections  to  investment  in  mortgages  are : 

(1)  The  inability  to  realize  readily  on  such  invest- 
ments. 

(2)  The  trouble  sometimes  experienced  in  collecting 
interest   due;   the   necessity   of   investigating   yearly   if 
taxes  and  assessments — always  liens  prior  to  a  mortgage 
—  are  paid. 

(3)  The  comparatively  short  duration  of  mortgages  as 
compared  with  State,  municipal,  or  railroad  bonds,  with 
the  consequent  necessity  of  reappraisal  of  the  mortgaged 
property  at  the  expiration  of  the  mortgage,   with  the 
possible  necessity  of  reinvestment  elsewhere,  often  with 
a  loss  of  interest  in  the  interval  of  non-investment. 

The  advantages  before  outlined  have,  however,  been 
material  enough  to  attract  millions  of  dollars  each  year 
to  this  form  of  investment.  The  remarkable  stability 
and  constant  rise  in  real  estate  in  New  York  City  have 
been  a  safeguard  to  investors  that  has  practically  pre- 
vented any  loss  of  either  principal  or  interest. 

The  chief  and  most  difficult  point  for  the  investor  in 
mortgages  to  determine  is :  the  value  of  the  property. 
The  rate  of  interest,  proper  examination  and  insurance 
of  title,  and  the  drawing  and  recording  of  necessary 
papers  also  must  have  attention. 

It  has  been  said  that  in  appraising  property  for  a 
loan  a  more  liberal  figure  should  be  placed  upon  it  than 
if  the  appraisal  is  made  with  the  object  of  determining 
immediate  selling  value.  This  to  a  certain  extent  is  true. 
The  immediate  selling  value  of  a  piece  of  property  may 
be  agreed  on  and  the  purchaser  may  be  willing  to  pay 

183 


Practical  Real  Estate  Methods 

such  a  price,  but  in  five  years'  time  as  the  mortgagee  may 
argue,  the  property  will  depreciate  in  value,  and  demands 
a  conservative  valuation  for  the  purpose  of  a  loan.  The 
converse,  however,  is  also  true,  and  in  this  city  has 
proven  true  more  often  than  the  former.  Property  has 
generally  shown  an  increase  in  this  city  in  almost  every 
section,  and  has,  in  good  locations,  more  than  offset  the 
depreciation  which  has  taken  place  in  the  building  it- 
self. It  is,  therefore,  quite  possible  and  proper  that  in 
valuing  property  for  the  purpose  of  a  mortgage  loan,  the 
elements  of  time,  depreciation  and  appreciation,  should 
be  taken  into  consideration,  and  should  be  factors  in 
determining  the  loan.  It  should  be  admitted  that  a  loan 
of  75%  of  the  value  of  property  in  a  superior  location, 
with  a  high  class  improvement  upon  it,  is  better  security, 
and  apt  to  be  a  more  conservative  loan  five  years  there- 
after, than  a  two-thirds  loan  on  property  poorly  located 
and  poorly  built,  where  the  depreciation  of  the  improve- 
ment will  not  be  offset  by  the  increase  in  land  value. 
Such  is  the  argument  which  some  of  our  largest  lenders 
on  mortgage  have  used  in  valuing  property  for  lending 
purposes,  and  the  theory  has  been  more  than  justified  by 
the  results  in  practice. 


Guaranteed  Mortgages 

To  remove  most  of  the  objectionable  features  of  mort- 
gage investment,  companies  have  been  formed,  and  have 
most  successfully  proceeded  to  take  mortgages  and  assign 
them  to  investors,  guaranteeing  the  payment  of  principal 
and  interest,  and  assuming  all  responsibility  for  their 
collection,  and  for  the  various  other  necessary  functions 
the  mortgagee  finds  so  burdensome.  A  charge  of 

184 


Mortgage  Loans  on  Real  Estate 

per  annum  is  made  for  the  guarantee  company's  services, 
and  this  comparatively  small  fee  has  made  this  form 
of  mortgage  investment  so  popular  that  in  the  past  three 
years  the  sale  of  guaranteed  mortgages  has  increased  to 
double  what  it  was  the  previous  three  years. 


The  Borrower's  Standpoint 

In  New  York  City,  a  majority  of  property  owners 
regard  a  mortgage  on  their  property  as  a  necessary 
evil.  They  prefer  to  own  three  pieces  of  real  estate, 
each  with  a  substantial  mortgage  thereon,  to  owning 
one  piece  of  property  free  and  clear.  This  view  may  be 
much  influenced  by  the  fact  that  where  property  is 
owned  as  an  investment  a  larger  return  can  be  obtained 
on  the  equity  if  mortgaged  for,  say,  two-thirds  of  its  value 
at  a  comparatively  low  interest  rate. 

To  obtain  a  mortgage,  one  must  know  where  to  go  to 
borrow.  The  title  companies,  the  savings  banks,  insur- 
ance companies,  and  a  multitude  of  estates  and  individ- 
uals, represented  by  attorneys  or  agents,  are  constantly 
looking  for  investments,  and  to  these  the  borrower  ap- 
plies. In  a  majority  of  cases  the  borrower  desires  as 
much  mortgage  on  his  property  as  he  can  obtain,  con- 
sistent with  the  interest  rate  he  desires  to  pay.  A  very 
liberal  loan  is  often  obtainable  if  a  high  interest  rate  is 
offered,  but  a  borrower  often  is  willing  to  accept  a 
small  and  ultra-conservative  loan,  in  consideration  of 
a  minimum  interest  charge.  A  borrower  must  be  able 
to  present  his  application  for  a  loan  in  a  favorable  light, 
and  to  discuss  intelligently  the  value  of  his  property.  It 
is,  however,  a  common  belief  that  a  borrower  can  rarely 
serve  his  own  interests  as  well  in  applying  directly  for  a 

185 


Practical  Real  Estate  Methods 

loan  to  a  principal,  as  by  employing  a  professional  mort- 
gage broker. 

The  reasons  for  this  are  obvious.  It  is  the  business 
of  the  broker  to  know  those  who  are  lending  money; 
to  be  posted  as  to  interest  rates ;  to  know  the  preference 
each  lender  has  for  a  particular  type  of  property  or  a 
particular  location. 

The  broker's  professional  acquaintance  provides  him 
with  the  entree  to  many  lenders  where  the  stranger  would 
find  difficulty  of  access  and  a  less  attentive  ear.  The 
broker's  opportunity  to  keep  posted  as  to  values,  makes 
his  advocacy  of  the  desirability  of  some  particular  loan 
carry  weight  that  an  inexperienced  borrower  would  fail 
to  impart. 

The  broker  can,  moreover,  parry  the  often  embarrass- 
ing questions  of  the  lender  by  the  truthful  statement  of 
"not  knowing."  The  owner,  who,  must  needs  either  pre- 
varicate or  state  the  fact  if  asked  as  to  the  condition  of 
his  property,  the  actual  income  and  vacancies,  and  also 
what  the  property  cost,  this  last  data  being  all  too 
often  a  guide  for  the  investor  in  fixing  value,  may  lose 
the  desired  loan  while  the  lender  misses  a  really  good 
investment. 

The  mortgage  broker  is  likewise  of  much  assistance  to 
the  lender  in  helping  to  find  him  a  good  investment,  and 
is  a  large  factor  in  the  mortgage  investment  business  as 
it  exists  in  this  city. 


The  Broker's  Standpoint 

The  mortgage  broker's  business  is  to  obtain  loans  for 
the  borrower,  and  investments  for  the  lender.  It  is  cus- 
tomary for  the  borrower  to  pay  the  broker's  commis- 

186 


Mortgage  Loans  on  Real  Estate 

sion.  It  would  seem  then  that  he  is  really  employed  by 
the  borrower,  but  the  good  broker  draws  no  such  dis- 
tinction. He  tries  to  harmonize  interests  of  both  lender 
and  borrower,  to  the  sacrifice  of  neither,  and  to  his  own 
future  advantage  by  retaining  the  good  will  and  opinion 
of  both. 

The  properly  equipped  mortgage  broker  must  have  a 
wide  acquaintance  among  lenders,  and  be  able  to  com- 
mand their  attention  and  interest  in  his  applications.  He 
must  constantly  watch  the  records  of  mortgage  invest- 
ments, keep  posted  and  remember  how  big  a  loan  was 
obtained  on  certain  properties  similar  to  that  on  which 
he  is  seeking  a  loan;  the  interest  rate,  terms,  etc.  The 
broker  must  watch  the  new  buildings  in  process  of  erec- 
tion and  have  an  acquaintance  among  the  builders,  so 
that  he  may  obtain  their  application  for  loans  on  the 
properties  when  completed.  This  is  the  most  prolific 
source  of  opportunity  for  mortgage  investment  in  this 
city,  and  the  broker  who  can  command  a  wide  range  of 
applications  for  loans  on  new  buildings  of  desirable  types, 
in  good  neighborhoods,  is  much  sought  by  lenders,  and 
accordingly  popular  with  borrowers. 

The  broker  should  direct  his  efforts  as  much  toward 
inducing  the  borrower  to  accept  a  reasonable  loan,  as 
he  should  in  obtaining  a  liberal  loan  from  the  lender. 
Ability  to  present  intelligent  and  obvious  reasons  to  a 
borrower  why  a  certain  offer  of  loan  should  be  ac- 
cepted, and  to  the  lender  why  a  certain  loan  should  be 
made,  will  always  bring  the  best  result. 

In  presenting  loan  applications  care  should  be  taken 
to  express  therein  all  accurate  information  obtainable, 
and  to  leave  out  any  statements  that  are  untrue  or  ex- 
aggerated. Nothing  is  so  detrimental  to  a  broker's  suc- 

187 


Practical  Real  Estate  Methods 

cess  in  obtaining  loans  as  wilfully  or  carelessly  to  over- 
state the  facts.  On  the  other  hand,  a  broker  must  be 
optimistic.  The  greatest  professional  asset  of  the  mort- 
gage broker  is  to  have  the  reputation  among  borrowers 
of  being  able  to  judge  correctly  as  to  what  loan  can  be 
obtained  and,  furthermore,  to  be  able  to  deliver  to  the 
lender  such  loans  as  the  latter  offers  to  make.  Nothing 
so  harms  a  broker's  reputation  with  the  investor  as  to 
be  unable  to  deliver  applications  which  the  latter  accepts 
from  him. 

It  is  obvious  therefore  that  the  broker  should  be  well 
posted,  not  only  as  to  the  amount  of  loans  being  made 
by  the  various  lenders,  to  the  prevailing  rates  of  interest, 
and  as  to  the  various  lenders  and  their  preferences  for 
particular  locations  and  classes  of  property,  but  also  to 
a  reasonable  extent,  about  building  construction,  rents, 
locations,  etc.  The  determining  point,  however,  in  all 
mortgage  investment,  about  which  all  argument  centers, 
and  to  establish  which  all  information  is  sought, 
is  value — what  is  the  property  worth.  The  borrower  sets 
a  value  on  his  property,  and  the  lender  confirms  or  re- 
futes the  owner's  statements  by  an  appraisal,  made  by 
some  competent  authority  in  whom  the  lender  has  confi- 
dence, or  perhaps  relies  upon  his  own  judgment.  The 
broker  must  be  able  to  discuss  with  both  borrower  and 
lender  the  question  of  value,  so  as  to  reconcile  the  gen- 
erally different  views  of  the  two  parties.  The  more  con- 
versant a  broker  is  with  the  methods  of  appraising  and 
determining  the  value  of  property,  and  the  more  con- 
vincing his  argument,  the  greater  his  chance  of  success. 
Often  he  is  thereby  enabled,  by  showing  the  borrower 
that  the  latter's  judgment  of  value  is  inflated  or  the 
lender  that  his,  or  his  appraiser's  judgment  of  value  is 

188 


Mortgage  Loans  on  Real  Estate 

over-conservative,  to  accomplish  a  meeting  point  of  ideas 
as  to  a  fair  valuation,  and  to  negotiate  the  desired  loan. 

A  broker's  office  should  be  equipped  with  a  system  of 
records  indicating  where  new  buildings  are  going  up, 
what  mortgages  are  daily  recorded,  and  a  record  of  all 
mortgages,  with  the  dates  on  which  they  become  due. 
By  this  latter  method  it  is  possible  to  interview  by  call 
or  mail,  owners  of  property  whose  mortgages  are  past 
due  and  who  may  be  influenced  to  take  a  new  loan,  either 
from  necessity  or  from  a  desire  to  borrow  more  money,, 
obtain  a  lower  interest  rate,  or  more  favorable  or  differ- 
ent terms. 


Participating  Mortgages 

It  often  happens  that  the  lender  desires  to  hypothecate 
his  security,  that  is,  borrow  money  on  the  mortgage 
which  he  holds,  and  is  unable  to  assign  the  mortgage  for 
the  full  amount  that  it  secures.  If  he  is  able  to  borrow 
90  per  cent  of  the  face  of  the  mortgage  he  secures  the 
remaining  10  per  cent  by  taking  a  participating  interest 
in  the  mortgage.  Sometimes  mortgages  from  the  incep- 
tion are  made  in  this  way,  one  party  holding  the  first 
interest,  and  another  the  secondary  or  junior  interest, 
subordinated  to  the  prior  interest. 

Participating  in  mortgages  is  of  recent  date,  and  origi- 
nated with  the  title  companies.  When  they  found  that 
they  had  on  hand  large  numbers  of  mortgages  which  they 
were  carrying  and  unable  to  dispose  of  separately  to 
various  clients,  they  went  to  investors,  and,  offering  as 
collateral,  for  example,  a  million  dollars'  worth  of  these 
mortgages,  borrowed  perhaps  $800,000  to  $900,000  upon 
them.  As  security  for  these  loans,  they  assigned  the 

189 


Practical  Real  Estate  Methods 

mortgages  absolutely,  with  an  agreement  from  the  lender 
that  when  the  entire  principal  was  collected  and  the  lender 
had  received  the  amount  due  him  with  interest,  he 
would  account  to  the  title  company  for  the  balance.  This 
form  of  agreement  has  gradually  become  a  standard  one, 
and  is  now  known  as  a  participation  agreement.  This 
hypothecation  of  mortgages  as  collateral  is  perfectly  legal 
and  proper,  and  gives  opportunity  to  the  large  life  in- 
surance companies,  savings  banks,  etc.,  to  invest  their 
funds  in  first-class  mortgages  with  first-class  security. 
This  form  of  investment  then  took  another  phase.  The 
title  companies  and  individuals,  finding  a  ready  market 
for  first  interests  in  mortgages,  began  taking  mortgages 
at  5%  interest  and  hypothecating  them  for  from  80% 
to  90%  of  their  face  value  at  4^%,  the  return  on  their 
subordinate  interest  being,  of  course,  very  large,  as  they 
made  one-half  per  cent  per  annum  on  the  whole  amount. 

A  further  development  was  the  forming  of  companies 
to  take  these  secondary  interests.  They  would  accept  first 
mortgage  loans,  provided  they  could  hypothecate  with 
some  individual  or  institution  the  first  interest  at  one- 
half  per  cent  lower  interest  rate,  which  gives  them  a 
large  return  on  their  secondary  interest,  which  is,  in 
effect,  a  second  mortgage. 

There  has  been  much  criticism  against  this  new  de- 
velopment in  the  mortgage  business,  due  to  the  fact  of 
the  obvious  deception  that  might  be  or  has  been  prac- 
ticed upon  innocent  third  parties,  who,  having  no  knowl- 
edge of  the  first  and  secondary  interests  in  the  supposedly 
first  mortgage,  purchase  property,  thinking  that  they 
have  on  it  a  bona  fide  first  mortgage,  whereas  at  the 
end  of  three  or  five  years  they  find  a  secondary  interest 
must  be  paid  off. 

190 


Mortgage  Loans  on  Real  Estate 

The  objection  to  this  method  of  arranging  mortgages 
can  be  readily  overcome  by  simply  recording  the  partici- 
pation agreement.  If  this  is  done  every  purchaser,  when 
he  searches  his  title,  will  find  this  agreement  of  record, 
and  will  know  exactly  the  status  of  the  mortgage  on  the 
property  he  is  buying.  Although  there  is  no  law  to  com- 
pel this,  it  should  be  insisted  on  by  the  first  interests  to 
prevent  misrepresentation.  An  affidavit  from  the  holder 
of  the  mortgage,  stating  that  he  held  the  entire  interest, 
or  how  it  was  actually  held,  would  cover  the  same  point. 


The  Need  for  Participating  Mortgages 

It  should  be  admitted,  therefore,  that  participating 
mortgages  are  a  benefit  and  perfectly  proper,  and  that 
the  objection  to  them  lies  in  the  present  method  of  hand- 
ling them,  and  not  in  the  participation  itself.  A  number 
of  institutions  have  refused  to  participate,  but  if  it  could 
be  shown  to  them  that  the  participation  agreement  was 
of  record  and  there  could  be  no  moral  reason,  as  there 
surely  is  no  legal  one,  why  they  could  not  loan  on  a  first 
mortgage  as  collateral  provided  they  hold  an  absolute 
assignment  of  the  mortgage,  and  physical  possession  of 
the  papers,  including  bond  and  mortgage,  title  policy, 
fire  insurance,  etc.,  their  objection  to  this  form  of  mort- 
gage lending  might  well  be  removed. 

When  borrowers,  lenders,  and  real  estate  investors  are 
thoroughly  acquainted  with  this  new  phase  of  the  mort- 
gage business,  participating  mortgages  will  become  more 
popular  if  the  methods  of  handling  them  are  amended. 
The  mortgage  business  in  New  York  has  assumed  such 
vast  proportions  that  the  means  of  obtaining  loans,  and 
particularly  of  financing  of  the  enormous  building  opera- 

191 


Practical  Real  Estate  Methods 

tions  started  in  New  York,  must  be  improved,  and  the 
participating  mortgage  is  a  progression. 

It  is  to  be  hoped  that  the  investing  public  in  general 
will,  in  the  near  future,  be  educated  to  participating  in 
mortgages  themselves,  so  that  instead  of  having  only  a 
first  and  secondary  participation,  we  may  be  able  to  have 
a  hundred  participations  of  $1,000  each  in  every  $100,000 
mortgage. 

In  Paris,  mortgage  bonds  or  participating  bonds  are 
as  salable  as  our  railroad  bonds  are  here.  The  obtaining 
of  large  amounts  on  mortgages  on  New  York  real  estate 
will  be  less  troublesome  only  when  the  French  methods 
of  mortgage  investments  are  adopted  in  this  city. 


192 


MARGINS  ON  MORTGAGE  LOANS 

GEORGE  A.  KURD 


Legal  Restrictions — Practice  in  Europe — Necessity 
for  Close  Appraisal — Rentals  as  a  Factor — Influence 
of  Panics — Depressed  Values — Changes  in  Neighbor- 
hood— Deterioration  of  Buildings — Delays  in  Fore- 
closure— Prices  at  Forced  Sales 


THE  margin  of  security  on  any  particular  real 
estate  mortgage  loan  depends  on  the  needs 
of  the  borrower  and  the  willingness  of  the 
lender  to  meet  those  needs.  As  a  result  of  this 
many  loans  are  made  for  only  a  small  percentage 
of  the  value  of  the  property  securing  them,  because 
the  needs  of  the  borrower  are  small.  In  any  com- 
munity, however,  and  on  any  class  of  property,  the 
greater  part  of  the  mortgage  business  consists  of  loans 
approaching  the  limit  of  safety,  as  that  limit  has  been 
ascertained  by  experience.  This  is  the  natural  result  of 
the  competition  of  lenders.  Since  the  limit  of  safety  must 
be  closely  approached  in  a  mortgage  business  of  any  size 
(unless  extraordinary  attractions  are  offered  to  borrow- 
ers through  low  rates),  it  becomes  of  the  highest  impor- 
tance to  examine  not  only  the  margin  required  by  gen- 
eral custom  or  by  law  for  trustees  and  institutions,  but 
also  the  separate  elements  of  risk  against  which  the  mar- 
gin is  to  guard. 

193 


Practical  Real  Estate  Methods 

We  are  not  considering  second  mortgages,  or  first  mort- 
gages which  are  made  for  an  exceptionally  large 
percentage  of  the  value  of  the  property  in  return  for 
exceptionally  high  interest  rates  or  commissions,  the 
latter  being,  in  effect,  the  combination  of  an  ordinary 
first  mortgage  and  a  second  mortgage  in  one  transaction ; 
nor  purchase  money  mortgages  where  an  unusual  per- 
centage of  the  selling  price  is  allowed  to  remain  on  mort- 
gage as  a  special  inducement  to  effect  a  sale,  such  trans- 
actions being  outside  of  the  ordinary  scope  of  the 
mortgage  business.  Disregarding  such  exceptional  cases 
then,  it  may  be  stated  that  the  smallest  margin  required 
by  law  or  observed  by  custom  anywhere  in  the  United 
States  is  on  New  York  City  mortgages,  where  loans  by 
trustees  are  limited  to  two-thirds  of  the  value  of  the 
security,  and  this  legal  provision  has  established  that 
percentage  of  the  value  as  a  proper  one  to  be  followed 
by  other  mortgage  lenders.  The  loans  of  savings  banks 
in  New  York  City  are  further  restricted  to  60%  of 
the  value  of  the  property,  and  it  is  only  a  few  years  since 
the  law  restricted  savings  bank  loans  to  50%  of  the  value. 
In  the  largest  American  cities,  other  than  New  York, 
60%  of  the  value  is  not  often  exteeded — that  is,  in  such 
cities  as  Chicago,  Philadelphia,  Boston  and  St.  Louis, 
while  loans  on  the  best  class  of  security  in  smaller  cities, 
and  the  best  type  of  farm  loans  in  such  States  as  Ohio, 
Illinois  or  Iowa,  are  limited  to  one-half  of  the  value  of 
the  security.  In  the  smaller  cities  a  still  larger  margin 
is  generally  required  on  residence  loans  which  are  ordi- 
narily from  25%  to  40%  of  the  value  of  the  security, 
and  about  the  same  percentage  is  loaned  on  farms  in 
the  more  remote  or  less  highly  developed  agricultural 
districts. 

194 


Margins  on  Mortgage  Loans 

Practice  in  Europe 

It  is  interesting  for  purposes  of  comparison  to  ex- 
amine the  requirements  of  margin  which  are  met  with  in 
Europe,  in  different  countries,  and  on  different  classes 
of  loans.  If  we  disregard  the  advances  of  the  Russian 
government  to  its  peasants,  which  have  amounted  to  75% 
of  the  value  of  the  land  in  Russia,  and  90%  in  Poland, 
we  find  that  the  only  companies  or  associations  ever 
allowed  by  law  to  loan  more  than  662-3%  of  the  value 
government  to  its  peasants,  which  have  amounted  to  75% 
is  the  usual  limit  on  land  and  60%  on  buildings,  the 
Hamburg  Association,  founded  in  1782,  which  could  loan 
up  to  75%,  and  the  Deutsche  Grandschuldbanke  in  its 
loans  on  city v  property.  In  Germany,  generally,  the  limit 
is  66  2-3%  of  the  value,  though  the  Prussian  Central 
Boden  Credit,  one  of  the  largest  of  their  mortgage  com- 
panies, is  limited  to  50%  of  the  value  of  buildings  and 
662-3%  of  the  value  of  land,  while  on  vineyards  and 
forests  the  limit  is  33  1-3%.  The  Deutsche  Grandschuld- 
banke, of  Berlin,  is  limited  on  farm  loans  to  60%,  and 
the  Bavarian  Mortgage  Company,  of  Munich,  to  50%. 
Other  German  companies  are  restricted  to  50%  of  the 
value  of  the  property,  or  to  60%  of  the  land  value  and 
50%  of  the  value  of  the  buildings.  There  is  quite  gen- 
erally a  tendency  in  Germany  and  Scandinavia  to  dis- 
tinguish between  the  land  value  and  the  value  of  the 
buildings.  This  is,  no  doubt,  largely  due  to  the  fact  that 
their  loans  are  commonly  for  a  long  period  of  years,  the 
terms  of  50  and  75  years  being  by  no  means  unusual 
there,  and  the  depreciation  of  buildings  from  age  during 
the  life  of  the  loan  being  very  considerable. 

Turning  to  other  countries,  the  Credit  Fonder,  of 

195 


Practical  Real  Estate  Methods 

France,  is  limited  to  50%,  except  on  forests  and  vine- 
yards, where  the  limit  is  33  1-3%.  In  Italy  the  limit 
for  mortgage  companies,  originally  placed  at  50%,  was 
raised  in  1881  to  662-3%,  though  the  loans  of  associa- 
tions are  still  kept  under  50%.  In  Russia  the  St.  Peters- 
burg Credit  Association  is  limited  to  50%,  and  the  same 
is  true  of  the  associations  in  Belgium,  though  the  mort- 
gage companies  there  loan  up  to  662-3%.  The  largest 
mortgage  company  in  Austria  is  limited  to  50%.  In 
Denmark  the  companies  are  limited  to  60%  on  land  and 
50%  on  buildings,  while  the  associations  are  limited  to 
50%  on  land  and  40%  on  buildings.  In  Norway  the 
limit  is  60%  on  all  farm  loans  and  loans  in  Christiania 
and  Bergen,  while  it  is  40%  to  50%  in  other  towns.  In 
Sweden  the  limit  is  generally  50%,  though  the  Stockholm 
Mortgage  Company  has  been  raised  to  60%.  In  Argen- 
tine and  Mexico  the  limit  is  also  50%.  The  limitation 
in  Germany  is  sometimes  expressed  in  terms  of  rentals, 
the  German  Mortgage  Bank  of  Berlin,  for  instance,  be- 
ing limited  to  ten  times  the  official  assessed  income  in 
cities,  and  twenty-five  times  the  assessed  income  on  es- 
tates, and  the  South  German  Mortgage  Company  to 
twenty  times  the  net  income. 

To  summarize  the  result  of  an  examination  of  the 
margins  required  in  different  countries,  it  may  be  stated 
that  the  limitation  on  loans'  varies  from  25%  to  75%  of 
the  value  of  the  security,  and  that  with  few  exceptions 
the  limitation  varies  between  33  1-3%  and  662-3%  of 
the  value. 

To  those  who  are  familiar  with  the  small  margins  re- 
quired on  short-time  banking  loans  based  on  collateral 
consisting  of  high  grade  stocks  or  bonds,  the  margins 
required  on  mortgage  loans  are  likely  to  seem  unneces- 

196 


Margins  on  Mortgage  Loans 

sarily  high,  and  this  point  of  view  on  the  part  of  bankers 
and  investors  has  led  to  serious  losses.  On  the  other 
hand,  through  laying  down  fixed  and  severe  rules  as  to 
the  amount  of  margin  required,  without  examining  the 
reasons  for  it,  opportunities  have  often  been  sacrificed 
for  meeting  what  is  really  a  reasonable  and  conservative 
demand.  While  many  of  the  same  factors  are  present  in 
farm  loans,  it  is  of  loans  on  city  property  that  I  wish 
especially  to  speak.  The  margin  on  city  loans  to  insure 
safety  must  be  sufficient  to  cover  the  following  six  ele- 
ments of  risk: 


Importance  of  Accurate  Appraisal 

First:  Errors  of  judgment  in  appraising  the  value  of 
the  property.  Since  each  piece  of  real  estate  stands  by 
itself,  there  can  never  be  a  "market  value"  for  it  in  the 
sense  that  there  is  for  bonds  or  shares  of  stock,  where 
each  sale  is  representative  of  the  value  of  the  entire  issue. 
The  valuation  of  real  estate  must  rest  on  opinion  only, 
and  while  it  may  be  comparatively  easy  for  an  expert 
with  full  information  to  value  real  estate  correctly  in  an 
active  market,  in  a  market  where  transactions  are  few 
the  difficulty  is  very  great.  In  order  to  have  appraisals 
of  any  value,  a  real  estate  expert  must  have  at  his  com- 
mand a  large  fund  of  information  in  regard  to  sales  of 
property,  rentals  of  property  and  the  cost  of  construction 
of  buildings,  since  these  are  indispensable  to  a  proper 
valuation  of  real  estate.  It  is  not  always  easy  to  obtain 
information  in  regard  to  the  consideration  for  sales,  espe- 
cially in  New  York  City,  where  the  practice  is  growing 
of  setting  out  a  nominal  consideration  of  one  dollar  in 
deeds  conveying  property.  The  insertion  in  deeds  of  fic- 

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Practical  Real  Estate  Methods 

titious  considerations  must  also  be  guarded  against,  such 
considerations  being  sometimes  met  with  where  the 
amount  has  been  placed  below  the  actual  selling  price, 
in  the  hope  of  obtaining  a  lower  assessment  for  purposes 
of  taxation,  and  more  frequently  placed  at  a  figure  above 
the  selling  price  in  the  hope  of  giving  the  property  a 
fictitiously  high  value. 

Rentals 

The  selling  price  of  property  ordinarily  reflects  the 
rental  of  the  property,  which  is  the  source  of  its  value, 
but  this  is  modified  by  the  prospect  of  the  future  rental 
of  the  property.  And  there  is  an  apparent  exception  to 
the  rule  that  values  follow  and  are  based  on  rentals  in 
the  case  of  high-class  residences  in  a  high-class  district, 
which  seldom  rent  for  a  reasonable  return  on  their  value. 
This  is  no  doubt  due  to  the  fact  that  ownership  of  such 
a  property,  which  gives  the  owner  its  permanent  occu- 
pancy and  is  paid  for  in  the  form  of  interest  on  the 
cost,  makes  this  worth  more  per  annum  than  the  tem- 
porary occupancy  of  the  house,  which  is  paid  for  by  the 
tenant  in  the  form  of  rental.  Disregarding  vacant  city 
land,  which  may  be  said  to  have  only  a  future  or  specu- 
lative value  and  is  not  accepted  as  mortgage  security  by 
any  mortgagee  company  in  Europe,  nor  by  conservative 
companies  in  this  country,  the  ordinary  method  of  ap- 
praisal of  improved  property  is  to  add  to  the  estimated 
land  value  the  present  cost  of  the  buildings,  with  an  al- 
lowance for  age  and  depreciation.  The  aggregate  of 
these  values  should  always  be  checked  wherever  possible 
by  capitalizing  the  net  rentals  of  the  property,  after  de- 
ducting expenses  of  all  kinds,  to  find  if  the  building's 

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commercial  value  is  equal  to  its  structural  value.  Wher- 
ever a  building  is  misplaced  or  badly  designed,  loss  of 
income  over  a  period  of  years  is  a  sure  result;  and 
examples  could  be  given  of  many  expensive  buildings,  the 
cost  of  which  has  been  entirely  thrown  away,  as  is  shown 
by  the  fact  that  the  net  rentals  produced  by  them  have 
been  less  than  those  produced  by  adjacent  properties  im- 
proved with  buildings  of  trifling  cost.  The  structural 
value  of  the  improvements,  considered  by  itself,  is  there- 
fore an  entirely  unsafe  guide  in  such  cases. 

On  the  other  hand,  to  rely  on  the  net  rentals  alone 
would  be  unsafe,  since  different  classes  of  property  are 
capitalized  on  a  different  interest  basis.  For  example, 
a  retail  store  property  rented  on  long  lease  to  an  entirely 
responsible  tenant  might  be  capitalized  on  a  basis  of  5% 
net  return,  where  a  tenement  house  with  a  large  number 
of  tenants  and  corresponding  vacancies  and  difficulties  of 
collection  would  naturally  be  capitalized  at  a  considerably 
higher  rate. 

Influence  of  Panics 

The  second  point  to  be  considered  is  that  mortgage 
loans  ordinarily  cover  so  long  a  term  of  years  that  gen- 
eral financial  and  commercial  depressions  during  the  life 
of  the  loans  cannot  be  foreseen,  and  loans  should  have 
margin  enough  to  cover  the  shrinkage  of  value  due  to 
this  cause.  A  period  of  general  industrial  depression  has 
a  powerful  depressing  effect  on  real  estate,  but  this  effect 
varies  greatly  on  different  classes  of  property.  When 
a  mortgage  loan  is  made  for  a  term  of  years,  if  the  bor- 
rower pays  his  interest  and  complies  with  the  covenants 
of  the  mortgage  in  regard  to  taxes,  insurance,  etc.,  the 
principal  of  the  loan  cannot  be  called,  nor  can  additional 

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Practical  Real  Estate  Methods 

security  be  called  for,  no  matter  what  the  decline  in  the 
value  of  the  property  mortgaged  may  be.  A  great  dis- 
tinction is  thus  apparent  between  mortgage  loans  and 
ordinary  bank  loans;  and  when  a  loan  is  made  for  the 
usual  term  of  five  years,  it  should  be  borne  in  mind  that 
the  property,  to  furnish  adequate  security,  should  at 
all  times  during  the  five-year  period  show  a  comfortable 
margin  above  the  amount  of  the  loan. 

We  are  familiar  with  the  recurrence  of  panics  every 
twenty  years,  with  intermediate  depressions  of  less  vio- 
lence at  ten  year  periods.  The  effect  on  real  estate  of 
these  greater  and  lesser  panics  is,  however,  not  directly 
commensurate  with  the  financial  and  commercial  disturb- 
ance which  they  cause.  A  reason  for  this  is  probably 
to  be  found  in  the  fact  pointed  out  by  Mr.  Adna  F. 
Weber,  an  eminent  authority  on  the  growth  of  cities,  that 
the  growth  of  population  of  American  cities  has,  ever 
since  the  foundation  of  our  government,  been  conspicu- 
ously greater  in  the  alternate  decades  coinciding  with  the 
lesser  or  intermediate  panics.  The  result  of  this  has  been 
to  offset  the  effect  of  intermediate  depressions,  as  far 
as  city  real  estate  is  concerned,  by  the  abnormal  growth 
of  city  population  coinciding  with  that  general  period; 
while  the  relatively  slow  growth  of  cities  during  the 
decades  coincident  with  the  greater  panics,  aggravates 
the  depression  of  real  estate  following  those  panics.  Dur- 
ing the  period  of  depression  following  a  great  panic, 
every  community  is  forced  to  restrict  its  expenditures  to 
the  most  necessary  objects,  and  the  result  of  this  is  that 
the  classes  of  property  within  a  city  which  maintain  their 
value  best  are  the  two  indispensable  classes  of  business 
and  residence.  All  properties  devoted  to  special  uses, 
such  as  theatres,  clubs,  hotels,  churches,  etc.,  as  well  as 

200 


Margins  on  Mortgage  Loans 

factories  and  warehouses  especially  suited  to  a  single  line 
of  business,  suffer  severely.  During  such  a  period,  also, 
all  properties  which  on  account  of  the  growth  or  move- 
ment of  a  city,  have  a  value  based  on  expectations  of 
the  future,  are  greatly  depreciated,  since  the  future  value 
is  largely  eliminated.  This  applies  especially  to  suburban 
land,  or  that  at  the  circumference  of  a  city  which  is  just 
coming  into  use,  and  is  aggravated  if  the  growth  of  a 
section  has  been  artificially  stimulated  by  capitalistic  in- 
fluences. 

Depression  of  Values 

The  difficulty  of  valuing  property  during  a  period  of 
depression  is  greatly  increased  just  at  the  time  when, 
through  falling  rentals  and  values,  it  is  most  necessary 
to  be  careful  in  making  mortgage  loans.  This  difficulty 
arises  partly  through  the  number  of  real  estate  transac- 
tions being  greatly  reduced  and  information  from  this 
source  thus  largely  cut  off,  since  no  property  owner  will 
sell  under  such  conditions  except  through  necessity.  And 
also  because  of  the  difficulty  of  forecasting  future  rentals 
where  vacancies  exist,  it  is  a  matter  of  the  greatest 
difficulty  to  judge  whether  these  are  to  be  temporary  or 
long  continued.  To  avoid  the  difficulty  which  arises  from 
a  lack  of  information  about  sales,  the  most  feasible 
method  is  to  prepare  a  scale  of  relative  values  for  a 
city,  so  that  a  few  real  estate  transactions  in  different 
localities  will  tend  to  show  the  drift  of  values,  just  as 
an  inspection  of  the  daily  fluctuations  of  half  a  dozen 
prominent  stocks  tends  to  show  the  drift  of  fluctuations 
for  the  whole  list  of  securities. 

A  further  effect  of  a  depression  on  values  of  different 
kinds  of  property  not  usually  given  sufficient  considera- 

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Practical  Real  Estate  Methods 

tion,  is  the  great  difference  which  a  reduction  in  the  gross 
rentals  of  property  makes  in  the  net  rentals  where  the 
expenses  of  the  property  are  heavy,  as  contrasted  with 
the  slight  effect  which  such  a  drop  in  gross  rentals  has 
where  the  expenses  of  a  property  are  light.  This  is 
readily  shown  by  contrasting  a  modern  office  building, 
which  normally  has  expenses  amounting  to  about  50% 
of  its  gross  rentals — these  expenses  including  not  only 
taxes  and  insurance,  but  heat,  light,  elevator  service,  jani- 
tor service,  etc.  —  with  a  store  building  of  moderate 
height  where  the  expenses  do  not  amount  to  over  15% 
of  the  gross  rentals,  the  owner  having  no  expenses  except 
taxes  and  insurance.  If  we  assume  a  drop  in  gross  ren- 
tals amounting  to  30%,  the  drop  in  net  rentals  of  the 
office  building  will  be  60%,  while  the  drop  in  net  rentals 
of  the  store  building  amount  to  only  about  35%.  Since 
values  follow  rentals,  the  stability  of  value  of  a  property 
that  is  less  expensive  to  operate,  tends  always  to  be 
greater  than  that  of  a  property  which  is  more  expensive 
to  operate,  and  careful  lenders  are  therefore  disposed  to 
exercise  the  utmost  caution  in  loaning  on  large  buildings, 
the  expenses  of  which  are  heavy. 


Changes  in  Neighborhood 

A  third  point  to  be  considered  and  guarded  against  is 
the  possible  loss  of  value  through  changes  in  the  internal 
structure  of  a  city.  In  retail  business  property  this  most 
commonly  occurs  through  the  advance  of  the  best  retail 
district  in  the  direction  of  the  best  residence  district;  in 
wholesale  property  through  changes  in  the  location  of 
wharves  or  railroad  terminals,  and  in  residence  property 

202 


Margins  on  Mortgage  Loans 

through  changes  of  fashion  or  of  transportation,  and  the 
encroachment  of  what  are  actually,  though  not  legally, 
nuisances. 

There  is  always  going  on  in  a  city  a  movement  of  the 
retail  stores  in  the  direction  of  the  best  residence  district, 
this  being  an  effort  on  the  part  of  the  storekeepers  to 
approach  as  closely  as  possible  to  their  customers.  As 
this  district  moves  forward  it  leaves  a  vacuum  behind  it, 
which  is  filled  later  by  wholesale  or  other  uses  which  are 
inferior  from  a  rental  standpoint.  Unless  the  growth  of 
a  city  is  so  rapid  as  to  make  its  wholesale  property  worth 
as  much  as  retail  property  was  a  few  years  before,  there 
will  be  an  actual  drop  in  the  value  of  the  property  so 
replaced  by  wholesale;  and  this  has  commonly  occurred. 
Where  there  has  been  a  change  of  axis  of  the  main  retail 
business  streets  of  a  city,  there  has  always  occurred  a 
shrinkage  of  the  values  created  by  an  anticipated  growth 
of  the  business  district  in  the  line  of  its  original  direction. 
Many  examples  are  to  be  found  in  American  cities  of  the 
best  retail  business  streets  being  parallel  to  a  lake  or 
river  front  during  the  growth  of  the  city  up  to  a  popu- 
lation of  perhaps  50,000,  while  after  that  point  in  popu- 
lation has  been  passed,  the  concentration  of  the  best 
residence  district  at  a  distance  from  the  water  front  has 
drawn  business  out  toward  these  residence  districts  on 
lines  at  right  angles  to  the  water  front  and  to  the  original 
business  streets. 

As  regards  wholesale  and  warehouse  property,  the  chief 
danger  to  be  guarded  against  arises,  as  I  have  said, 
through  changes  in  the  location  of  transportation  termi- 
nals. The  natural  tendency  of  wholesale  property  is  to 
place  itself  between  its  transportation  facilities  and  the 
best  retail  business  district,  so  that  it  may  at  the  same 

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Practical  Real  Estate  Methods 

time  be  able  to  handle  its  goods  cheaply  and  yet  be  in  a 
location  convenient  for  its  customers.  Where  the  whole- 
sale business  of  a  city  grew  up  through  river  transpor- 
tation, as  for  example,  in  Savannah,  and  Portland,  Ore., 
it  is  noticeable  that  of  late  years  the  predominance  of 
railroads  has  been  so  great  as  to  withdraw  wholesale 
business  very  largely  from  locations  occupied  by  it  for 
half  a  century,  with  an  increase  of  value  near  the  rail- 
road terminals  and  a  corresponding  decrease  of  value 
near  the  wharves. 

In  the  case  of  residence  property,  purely  social  reasons 
are  the  predominant  ones  in  establishing  high  values,  and 
property  of  this  character  is,  for  this  reason,  liable  to 
depreciate  through  changes  of  fashion.  Changes  of  trans- 
portation are  also  of  great  importance  in  determining 
residence  values.  Improvements  in  street-car  facilities 
enable  people  of  a  good  social  class  to  live  at  greater 
distances  from  the  business  center  of  a  city  and  among 
surroundings  which  are  pleasant.  The  general  tendency 
of  our  street  railway  improvements  of  the  last  twenty 
years  has  been  to  equalize  the  value  of  residence  prop- 
erty over  considerable  areas,  and  as  a  result  of  this  to 
depreciate  residence  property  which  is  close  to  business 
property,  while  rapidly  enhancing  the  value  of  property 
further  out,  which  is  well  located  topographically.  Resi- 
dence districts  at  a  distance  from  the  business  center  of 
a  city  have  an  element  of  stability  in  the  fact  that  they 
are  less  likely  than  those  closer  to  the  business  center 
to  be  injured  by  the  encroachment  of  nuisances.  In  the 
term  "nuisances"  may  be  included  buildings  for  every 
kind  of  utility  except  residence,  since  homogeneity  is 
necessary  to  the  maintenance  of  value  in  a  residence  dis- 
trict. 

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Margins  on  Mortgage  Loans 

Deterioration  of  Buildings 

The  fourth  element  to  be  considered  is  the  depreciation 
of  buildings.  Mortgage  loans  are  usually  made  for  a 
long  enough  term  to  have  the  improvements  lose  appre- 
ciably in  value  from  age  and  the  wear  and  tear  of  usage 
during  the  life  of  the  loan,  except  in  cases  of  the  most 
expensive  construction.  The  loss  through  depreciation 
where  a  building  is  kept  in  good  repair  is  estimated  at 
y2  %  a  year  for  the  highest  type  of  fireproof  construction, 
and  increases  for  different  classes  of  buildings  to  a  maxi- 
mum of  5%  a  year,  or  even  more,  for  cheaply  constructed 
workmen's  cottages.  If  improvements  are  not  kept  in 
good  repair — and  it  is  practically  impossible  for  a  mort- 
gagee to  compel  repairs  to  be  made — the  further  depre- 
ciation from  this  cause  must  be  added.  In  addition  to 
the  depreciation  of  buildings  through  age,  there  fre- 
quently occurs  a  further  and  more  serious  depreciation, 
due  to  changes  in  style  or  new  methods  of  construction, 
or  to  a  change  of  utility  in  the  location.  An  example  of 
such  a  change  of  style  in  detached  residences  has  been 
the  abandonment  of  the  mansard  roof,  once  popular 
throughout  the  United  States,  with  the  result  that  resi- 
dences built  in  this  style  of  architecture  depreciated  heav- 
ily in  value,  regardless  of  the  soundness  of  their  struc- 
tural condition.  Other  changes  in  fashion  affecting  resi- 
dences are  the  abandonment  of  narrow  hallways  and  of 
stained  glass  and  other  exterior  ornamentation,  together 
with  newer  and  better  methods  of  heating  and  lighting 
houses. 

As  regards  business  property,  the  erection  of  modern 
fireproof  buildings  frequently  takes  away  a  large  part  of 
the  value  of  the  older  buildings  with  which  they  com- 

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Practical  Real  Estate  Methods 

pete;  and  the  failure  of  architects  formerly  to  plan  their 
store  buildings  with  the  ground-floor  frontage  all  open 
for  the  display  of  goods  has  greatly  depreciated  the 
value  of  older  buildings,  or  has  led  to  their  reconstruction 
along  modern  lines  at  large  expense. 

There  is  still  a  further  element  of  depreciation  which 
conies  where  there  is  a  change  of  utility  in  the  location. 
If  a  residence  property  has  become  suitable  only  for  busi- 
ness, the  value  of  the  improvements  disappears  entirely; 
and  the  same  is  true  of  any  such  change  of  utility,  sub- 
ject, of  course,  to  the  possibility  of  saving  a  portion  of 
the  value  of  existing  improvements  through  their  recon- 
struction for  a  new  purpose. 

Losses  in  Foreclosure 

A  fifth  point  to  be  considered  is  that  of  the  accumula- 
tions pending  and  during  foreclosure,  including  the  pe- 
riod of  redemption,  if  there  is  one.  The  amount  loaned 
on  property,  practically  speaking,  is  not  the  face  of  the 
loan,  but  the  amount  of  the  debt  with  all  its  accumulations 
at  the  time  of  realizing  on  the  property  which  has  secured 
the  debt.  These  accumulations  are  usually  made  up  of 
delinquent  interest,  delinquent  taxes  (with  penalties  and 
a  high  rate  of  interest),  delinquent  street  improvement 
taxes  (with  penalties),  court  costs,  attorneys'  fees,  re- 
pairs after  obtaining  the  property,  and  a  real  estate  com- 
mission for  selling  which  varies  from  1%  in  New  York 
up  to  5%  in  smaller  communities.  In  addition  to  these, 
there  is  the  total  or  partial  loss  of  interest  from  the 
time  of  commencing  suit  until  the  property  is  finally 
sold.  In  the  aggregate  these  accumulations  vary  from 
10%  of  the  face  of  the  loan  to  a  maximum  of  40% 

206 


Margins  on  Mortgage  Loans 

in  cases  of  small  loans  where  the  laws  are  unfavorable 
to  lenders.  These  variations  in  the  amount  of  the  accu- 
mulations attract  attention  to  a  comparison  of  the  laws 
of  the  various  States  in  regard  to  mortgage  loans.  One 
of  the  common  provisions  in  Western  States,  and  one 
which  adds  largely  to  the  accumulation,  is  the  provision 
of  law  granting  to  the  mortgagor  a  period  after  judgment 
of  foreclosure  within  which  he  may  redeem  the  property 
by  paying  to  the  judgment  creditor  the  amount  of  the 
judgment  with  interest.  This  provision  seems  to  have 
come  into  existence  in  States  where  mortgage  loans  on 
agricultural  property  predominated,  with  a  view  to  avoid- 
ing the  serious  effect  on  farmers  of  a  single  crop  fail- 
ure; and  since  such  laws  must  be  uniform  in  their  op- 
eration, they  apply  to  loans  on  city  property  as  well. 
This  period  of  redemption  varies  from  nine  months  in 
Nebraska  and  a  year  in  most  of  the  Rocky  Mountain 
and  Pacific  Coast  States,  to  eighteen  months  in  Kansas 
and  two  years  in  Alabama.  The  effect  of  this  law  is 
to  prevent  outside  parties  from  buying  at  foreclosure 
sales,  since  they  cannot  be  sure  that  the  property  will 
not  be  redeemed  by  the  mortgagor  by  payment  of  the 
judgment  and  interest,  and  also  prevents  a  mortgagee 
during  the  period  of  redemption  from  improving  the 
property  and  obtaining  larger  rentals,  for  the  same  rea- 
son. Where,  as  in  a  few  of  the  Middle  Western  States, 
such  as  Indiana,  Minnesota  and  Iowa,  the  mortgagor 
remains  in  possession  during  the  period  of  redemption, 
the  accumulation  is  much  greater,  since  during  this  pe- 
riod the  mortgagee  is  entitled  to  no  rental  return  at  all ; 
and  a  further  action  at  law  may  become  necessary  to 
obtain  possession.  Other  legal  features  which  affect  the 
amount  of  the  accumulations  are  those  which  permit  in- 

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Practical  Real  Estate  Methods 

terest  to  be  compounded;  which  permit  penalty  rates  of 
interest,  both  on  delinquent  principal  and  interest,  and 
large  contractual  attorneys'  fees.  Obviously,  the  element 
of  time  is  the  principal  one,  and  where  a  mortgage  may 
be  foreclosed  and  the  property  obtained  in  a  short  time, 
the  accumulations  will  be  small.  In  this  respect  the  laws 
prevailing  in  the  Southern  States  are  more  favorable  to 
lenders  than  those  in  any  other  part  of  the  United  States. 
In  Europe  the  advantage  to  lenders  of  being  able  to 
foreclose  without  delay  is  generally  recognized,  and  the 
laws  governing  foreclosure  have  been  in  this  respect  car- 
ried so  far  that  the  Credit  Foncier,  of  France,  can  obtain 
title  to  properties  under  foreclosure  in  eight  days  after 
default,  and  the  Banco  Hipotecario,  of  Spain,  in  two  days 
after  default. 

Danger  of  Forced  Sales 

The  sixth  point  to  be  considered  is  the  loss  of  value 
through  disposing  of  the  property  at  forced  sale,  and 
through  the  injury  to  the  reputation  of  the  property 
caused  by  the  foreclosure.  Though  properties  seldom 
have  to  be  bought  by  the  mortgagee  at  foreclosure  sales 
in  Europe,  it  is  still  the  common  rule  in  the  United 
States,  largely  owing  to  defects  in  our  mortgage  laws. 
As  has  been  pointed  out,  the  time  necessary  to  obtain 
title  or  sell  the  property  at  foreclosure  sale  in  Europe  is 
generally  very  much  less  than  it  is  anywhere  in  the 
United  States,  and  is  generally  less  in  the  Eastern  and 
Southern  States  than  in  the  Western.  It  is  usually  in 
the  largest  cities  only,  however,  that  there  is  any  specu- 
lative market  furnishing  a  demand  for  properties  of  all 
kinds  at  all  times  at  a  reduction  in  price  from  the  normal 
value.  Outside  of  New  York  City  there  is  practically  no 

208 


Margins  on  Mortgage  Loans 

auction  market  for  real  estate,  except  in  New  Orleans 
and  Norfolk,  Va.,  and  in  most,  though  not  all,  of  the 
smaller  cities  properties  are  sold  generally  to  those  who 
intend  to  use  them  personally.  The  disposal  of  fore- 
closed property  as  promptly  as  possible  in  order  to  realize 
on  it,  is  the  aim  of  most  individual  investors,  and  should 
be  the  aim  of  all  financial  institutions,  since  real  estate, 
other  than  that  needed  for  their  own  use,  is  not  a  proper 
asset  for  them  to  hold,  as  is  recognized  by  law.  For  the 
reasons  I  have  mentioned,  where  a  quick  sale  is  desired, 
a  surprising  difference  will  be  found  in  different  com- 
munities and  on  various  classes  of  property,  some  cities 
having  an  active  market  which  will  absorb  any  good 
property  offered  at  a  price  within  perhaps  5%  to  10% 
of  its  full  value,  while  in  other  cities  it  is  difficult  to  ob- 
tain within  25%  of  the  full  value  obtainable  under  favor- 
able circumstances.  , 

Safeguards 

It  remains  to  suggest  how  these  various  elements  of 
depreciation  may  be  guarded  against  without  demanding 
excessive  margins  on  mortgage  loans.  Errors  of  judg- 
ment in  appraising  may  be  largely  eliminated  by  trusting 
only  to  experts  of  approved  ability  and  by  concentrating 
responsibility  upon  them,  testing  and  examining  their 
work  by  its  results.  In  the  ordinary  course  of  a  mort- 
gage business,  if  loans  are  not  properly  margined,  the 
first  sign  of  this  will  be  an  abnormal  amount  of  delin- 
quent interest,  followed  by  an  increasing  number  of  fore- 
closures, before  any  actual  loss  occurs.  These  act  as  a 
warning  that  the  business  is  not  being  properly  con- 
ducted, as  in  times  of  ordinary  prosperity  there  should 
be  practically  no  foreclosures.  The  effects  of  a  general 

209 


Practical  Real  Estate  Methods 

depression  may  be  partially  avoided  by  anticipating  the 
depression  as  far  ahead  as  possible,  and  either  making 
loans  for  less  than  the  usual  term  of  years,  or  providing 
for  a  partial  amortization  through  annual  or  semi-annual 
obligatory  payments  in  reduction  of  the  principal,  so  that 
only  a  small  proportion  of  loans  will  be  outstanding  for 
their  full  amount  when  the  panic  comes.  Special  care 
should  also  be  exercised  not  to  rely  on  the  selling  prices 
of  property  during  the  period  of  inflation  of  values, 
which  commonly  precedes  a  depression.  The  effect  of  a 
general  depression  may  also  be  minimized  by  skill  in 
choosing  the  classes  of  property  on  which  to  loan,  retail 
business  property  and  single  residences  furnishing  the 
most  stable  security  during  a  depression,  and  in  large 
cities  multiple  dwellings  of  the  tenement  type,  followed 
by  wholesale  property,  large  office  buildings,  hotels,  apart- 
ments, clubs,  theatres  and  other  special  utilities  in  some- 
what the  order  named. 

Loss  of  value  through  changes  in  the  structure  of  a 
city  may  be  largely  avoided  by  a  study  of  the  principles 
governing  the  growth  of  cities  and  by  care  in  choosing 
the  locations  in  which  to  loan.  Business  property  main- 
tains its  value  best  when  on  a  main  axis  of  traffic,  and 
residence  property,  when  it  is  located  in  a  large  and 
homogeneous  district  of  good  social  character,  with  good 
transportation  facilities  and  an  absence  of  neighboring 
nuisances.  Depreciation  through  age,  etc.,  should  not 
be  serious,  if  the  cheaper  classes  of  structures  and  those 
which,  from  the  nature  of  their  occupancy  will  have  the 
hardest  usage,  are  eliminated.  Accumulations  of  delin- 
quent interest,  etc.,  can  be  reduced  by  bringing  fore- 
closure suits  promptly,  and  by  avoiding  those  jurisdictions 
where  the  mortgage  laws  are  exceptionally  unfavorable, 

210 


Margins  on  Mortgage  Loans 

Finally,  the  difficulty  of  realizing  fully  on  property  at  a 
forced  or  quick  sale,  should  always  be  borne  in  mind  and 
allowed  for,  and  property  of  a  class  that  suffers  unduly 
from  this  cause,  such  as  suburban  property  or  speculative 
holdings,  should  be  avoided. 


211 


BUILDING  LOANS 

G.  RICHARD,  DAVIS 

Kinds  of  Building  Loans — Loans  in  New  York  and 
Elsewhere — Speculative  and  Contract  Building— Loan 
Associations — Operators',  Owners',  and  Permanent 
Loans — How  to  Figure  Building  Payments 

A  GENERAL  definition  of  a  building  loan  might  be  that 
it  is  a  loan  secured  by  bond  and  mortgage  on  a 
piece  of  vacant  property,  for  the  purpose  of  giving 
to  the  owner  of  that  property  the  necessary  financial 
accommodation  to  assist  him  in  the  erection  of  a  building 
upon  his  land. 

The  broker,  builder  and  building  loan  investor,  all  of 
whom  deal  in  building  loans,  have  continued  occasion  to 
estimate  how  large  a  building  loan  may  be  obtained,  or 
should  be  made,  on  certain  projected  building  operations. 

The  lender  and  broker  must  also  understand  how  to 
safeguard  their  interests,  when  and  in  what  sums  to  ad- 
vance money,  etc. 

In  estimating  the  amount  of  building  loan  to  be  made, 
consider  (i)  the  dimensions  of  the  land;  (2)  the  area 
or  the  percentage  of  the  lot  that  the  building  itself  will 
cover;  (3)  the  height  and  general  character  of  the  build- 
ing— that  is,  whether  it  is  fireproof  or  non-fireproof,  and 
the  purpose  to  which  it  is  to  be  put ;  (4)  examination  of 
the  plans  and  specifications;  (5)  whether  the  building, 
if  properly  planned,  is  of  a  character  suitable  to  the 

212 


Building  Loans 

neighborhood  in  which  it  is  to  be  erected ;  (6)  the  finan- 
cial responsibility  of  the  builder  and  his  general  standing 
as  a  mechanic  and  constructor  of  well-built  buildings ;  and 
last  and  most  important,  the  value  of  the  land  and  the 
cost  of  the  contemplated  improvement.  All  these  points 
enter  into  the  question  of  whether  a  building  loan  should 
be  made  and  how  much  should  be  loaned. 

Percentage  of  Lot 

In  figuring  the  percentage  of  the  lot  that  a  building 
will  cover,  deduct  the  area  of  the  court,  sides  and  yard 
space.  The  tenement  house  law  in  New  York  City  will 
not  permit  a  building  built  on  an  interior  lot  to  cover 
more  than  70  per  cent  of  the  area  of  the  lot.  On  a  corner 
lot  there  is  no  restriction  placed  on  the  percentage  of 
area  that  may  be  covered,  but  the  yard  of  the  corner 
building  must  be  10  feet  wide  for  a  distance  of  50  feet 
back  from  the  street,  and  thereafter  2  feet  wider,  if  the 
building  be  five  stories  high ;  and  one  foot  more  for  each 
additional  story  that  may  be  added,  so  that  for  a  twelve- 
story  building  on  a  corner  lot  100x100,  the  yard  would 
be  10  feet  in  width  for  50  feet  of  the  depth,  and  19  feet 
in  width  for  the  remaining  50  feet.  The  widths  of  courts 
and  shafts  are  all  dictated  by  the  tenement  house  law. 
It  is  therefore  possible,  when  all  these  laws  are  observed, 
only  to  cover  about  80  per  cent  of  a  corner  plot,  unless 
it  has  an  extreme  amount  of  frontage  in  comparison  to 
its  depth. 

Cubical  Contents 

To  arrive  at  the  cubical  contents  of  a  building,  multiply 
the  area  of  the  building  by  the  height  of  the  building, 
measured  from  the  bottom  of  the  cellar  to  the  top  of  the 

213 


Practical  Real  Estate  Methods 

roof  beams,  and  you  have  the  cubic  contents  of  the  build- 
ing. In  addition  to  this,  add  the  cubic  contents  of  all 
bulkheads,  extensions  over  courts  on  first  floor,  or  vaults 
under  the  sidewalk.  Any  accurate  estimate  of  the  cubic 
contents  of  a  building  should  be  based  on  an  accurate 
measurement  of  the  size  of  the  courts  and  yards,  so  as 
to  obtain  the  exact  area  that  the  building  will  cover. 

The  Use  of  the  Building 

Determining  not  only  the  general  character  of  a  build- 
ing, but  also  the  adaptability  of  a  particular  building  to 
a  particular  site,  are  most  important,  as  it  would  be  ob- 
viously an  ill-judged  investment  to  finance  the  building 
of  an  apartment  house  on  Broadway  near  Wall  Street,  or 
a  large  office  building  on  Washington  Heights.  The 
best  judgment  of  the  lender  must  be  brought  into  play 
in  considering  the  proper  improvement  for  a  particular 
neighborhood,  as  upon  this  depends  the  success  of  the 
operation,  and  the  lender,  as  well  as  the  builder,  needs 
a  successful  operation,  if  his  business  is  to  continue  a 
profitable  one. 

The  chief  risk  to  the  lender  is  the  builder's  failing  to 
complete  the  building.  A  careful  investigation  of  the 
builder's  references,  through  material  associations  and 
other  sources,  will  generally  give  the  necessary  informa- 
tion. 

It  is  obvious  that  in  the  handling  of  building  loans, 
practical  knowledge  of  building  and  of  architecture,  to 
a  more  or  less  degree,  is  a  requisite.  The  technical 
knowledge  and  advice  of  the  engineer  and  architect  are 
often  required.  In  the  ordinary  types  of  five  or  six-story 
buildings,  such  advice  is  not  necessary,  except  in  special 

214 


Building  Loans 

work,  such  as  deep  foundation  work,  as  the  building  loan 
man  is  supposed  to  have  a  general  practical  knowledge 
of  how  to  build.  But  the  lender  of  money  for  a  building 
loan  on  a  ten  to  twenty  story  fireproof  building  should 
employ  competent  engineering  and  architectural  super- 
vision and  advice  to  see  that  the  plans  and  specifications 
are  correct  and  adequate,  and  that  the  building  is  built 
according  to  them. 

Building  Payments 

In  the  making  of  payments,  and  in  the  conduct  of  the 
entire  building  transaction,  it  requires  continuous,  care- 
ful attention  to,  and  expert  knowledge  of,  the  situation 
by  the  building  loan  man.  Building  payments  are  ar- 
ranged in  schedules  and  agreed  on  in  advance  in  writing, 
but  they  are  rarely  lived  up  to,  as  builders  often  want 
money  in  different  ways,  and  in  more  payments  than 
agreed.  A  reasonable  building  loan  man  will  let  re- 
sponsible and  well-meaning  builders  have  these  accom- 
modations, as  no  contract  can  be  drawn  which  will  cover 
all  the  necessities  which  arise  in  operations  covering  a 
period  differing  from  six  months  to  two  years.  It  must 
not  be  supposed  that  loans  of  this  kind  can  be  obtained 
without  more  than  the  usual  charge,  both  of  interest 
and  fees,  than  that  made  for  permanent  loans.  The  cost 
is  governed  by  money  conditions,  and  varies  materially 
at  times.  Typical  schedules  of  payments  for  different 
sizes  of  buildings  are  given  at  the  end  of  this  chapter. 

Among  the  life  insurance  companies  and  other  finan- 
cial institutions  which  make  this  kind  of  loan,  it  is  custo- 
mary to  charge  a  fee  in  addition  to  interest  charges,  suffi- 
cient to  defray  the  cost  of  title  examination,  employment 

215 


Practical  Real  Estate  Methods 

of  counsel,  architects  and  engineers.  They  also  are  most 
particular  as  to  the  responsibility  of  the  builders  they  loan 
to  and  in  a  number  of  cases  insist  on  some  substantial 
bond  as  guarantee  that  the  building  will  be  completed. 

Throughout  the  entire  handling  of  building  loan  op- 
erations, there  is  always  risk  of  the  builder's  failing  to 
complete  his  building.  The  number  of  failures  among 
builders  is  proof  of  the  fact  that  mistakes  are  constantly 
being  made.  Owing  to  the  agreements  among  the  work- 
ingmen's  unions  and  among  the  material  associations,  it 
is  very  difficult  to  finish  a  building  operation  on  which 
a  builder  fails  and  owes  money  to  the  contractors,  without 
making  a  settlement  with  these  unions,  because  they  con- 
trol the  employment  of  labor  and  the  output  of  material. 
Thus,  although  the  failure  of  the  builder  may  ruin  him,  it 
also  falls  heavily  upon  the  man  who  has  his  money  in 
the  operation. 

Loans  in  New  York  and  Elsewhere 

It  may  be  well  to  draw  a  distinction  between  building 
loans  as  made  in  New  York  City  and  elsewhere,  owing  to 
the  difference  in  the  laws  in  other  States  regarding  me- 
chanics' liens  and  building  loans.  Speculative  building, 
as  we  understand  it  in  this  city,  is  practically  unknown 
outside.  Buildings  are,  of  course,  put  up  by  speculators, 
but  they  generally  do  not  do  the  actual  building  work, 
as  our  speculators  do,  but  let  a  contract  for  the  construc- 
tion of  the  building  to  a  building  contractor  for  a  fixed 
sum.  If  they  want  to  obtain  a  building  loan  they  file 
their  contract  with  the  financier  or  the  building  loan  com- 
pany, which  contract  states  specifically  the  exact  cost  of 
the  building.  The  building  loan  company  agrees  to  loan 

216 


Building  Loans 

to  them,  let  us  say,  60  per  cent  of  the  cost  of  the  building. 
As  the  speculator  or  owner  of  the  building  makes  pay- 
ments to  the  contractor  on  account  of  the  contract  price, 
he  obtains  from  his  building  loan  company  60  per  cent 
of  the  amount  he  has  advanced,  upon  showing  a  receipt 
from  the  contractor  for  the  payments  and  a  release  from 
the  contractor  of  his  right  to  lien.  The  lien  laws  in  some 
States  are  such  as  to  make  the  amount  due  a  contractor 
during  the  progress  of  the  building,  a  prior  lien  to  every 
indebtedness  of  the  property,  whether  there  is  a  mortgage 
or  not,  except  the  city's  claim  for  taxes,  assessments,  etc. 
Therefore  the  mortgagee  dare  not  advance  any  money  on 
the  building  until  he  knows  that  there  are  no  liens  against 
it ;  and  to  protect  himself,  he  obtains  releases  in  the  form 
of  affidavits  from  the  owner  and  the  contractor  and  sub- 
contractor, if  any,  that  there  is  no  money  due  or  unpaid 
them  on  the  building,  or  else  a  waiver  of  their  right  to 
lien.  These  laws  practically  insure  to  the  contractors  the 
receipt  of  their  money,  whereas  in  New  York  State,  the 
lien  laws  are  very  different,  and  no  mechanics'  lien  takes 
prior  claim  to  a  mortgage  unless  it  is  recorded  before  the 
mortgage  is  recorded  or  before  each  advance  is  made 
under  the  building  loan  contract. 

Speculative  and  Contract  Building 

Speculative  building  and  contract  building  therefore 
are  distinct  branches  of  the  building  industry,  and  New 
York  City  and  its  suburbs  seem  to  have  a  monopoly  of 
the  speculative  builder,  as  we  know  him.  Whereas,  the 
contracting  builder  puts  up  the  house  with  money  fur- 
nished to  him  by  the  speculator  or  the  owner,  the  specu- 
lative builder  not  only  builds  the  house,  but  borrows  the 

217 


Practical  Real  Estate  Methods 

money  on  his  own  name  and  credit  to  build  it.  The 
building  contractor  is  primarily  and  only  a  builder  and 
not  a  financier  as  welK  His  business  is  to  know  all  about 
construction,  materials,  where  and  how  to  purchase  them, 
and  their  relative  cost,  value  and  usefulness.  The  specu- 
lative builder  must  or  should  know  all  of  these  things 
and  in  addition  be  a  financier,  able  to  borrow  money  and 
to  use  his  credit  along  more  or  less  extensive  lines  to 
swing  his  various  operations.  The  methods  of  the  specu- 
lative builder  here  briefly  outlined  are  made  possible 
only  by  the  high  position  which  New  York  City  real 
estate  holds  as  a  first-class  security,  the  stability  of  which 
is  unquestioned  and  the  marketability  of  which,  as  com- 
pared with  other  cities,  is  immeasurably  greater. 

Building  Loan  Associations 

In  this  country  there  are  a  number  of  building  and 
banking  loan  associations  which  have  established  towns 
and  villages  through  their  financing  methods.  Some  of 
the  co-operative  ones  are  most  worthy  and  serve  their 
purpose  well  in  providing  the  workman  with  the  means 
of  building  and  owning  his  own  home. 

They  lend  their  stockholders  sufficient  money  to  buy 
a  plot  of  land  and  build  a  house  upon  it.  By  paying  so 
much  a  month  on  account  of  this  loan,  in  addition  to  the 
interest,  the  property  holder  gradually  frees  it  from  mort- 
gage. In  most  cases  the  workman,  after  paying  off, 
say,  50  per  cent  of  the  money  he  owes  the  associa- 
tion, is  able  to  borrow  the  other  50  per  cent  outside  at 
a  lower  rate  of  interest  and  for  a  long  period,  and  pay 
off  the  association. 

Other  classes  of  building  loan  associations  are  those 

218 


Building  Loans 

formed  by  a  few  men  for  their  own  benefit  and  of  purely 
speculative  character.  These  men  buy  large  tracts  of 
land  and  exploit  them,  selling  them  to  workingmen,  pay- 
ing dividends  out  of  the  principal,  and  when  they  fail, 
leave  no  assets. 

Methods  in  Other  Cities 

In  Philadelphia  and  Chicago,  which  are  more  nearly 
equal  to  New  York,  the  method  of  financing  building  op- 
erations has  more  nearly  approached  French  methods.  In 
Chicago,  several  concerns  have  financed  the  building  of 
fine  apartment  houses  and  business  buildings,  upon  which 
they  loaned  from  50  to  60  per  cent  of  the  value.  They 
have  issued  against  these  mortgages  bonds  due  in  from 
one  to  fifteen  years  with  varying  rates  of  interest,  from 
5  to  6  per  cent.  These  bonds  are  sold  to  individual  lend- 
ers in  any  amount  from  $100  upward. 

In  Philadelphia,  two  or  three  trust  companies  lend  most 
of  the  money  and  in  the  form  of  permanent  mortgages, 
from  three  to  ten  years,  making  the  first  advance  when 
construction  is  started,  and  thereafter,  as  it  proceeds  to- 
ward completion,  when  the  loan  remains  as  permanent  for 
varying  periods.  This  latter  form  of  mortgage  is  also 
common  now  in  New  York,  and  is  what  we  call  a  build- 
ing permanent  loan  or  a  permanent  loan  in  building  pay- 
ments. 

Big  Operations  on  Small  Capital 

It  is  astonishing  to  people  who  have  not  gone  into  this 
subject,  yet  careful  investigation  shows  that  the  build- 
ing loan  operators  in  this  city  have  made  it  possible  for 
a  man  with  $5,000  to  complete  an  operation  involving 
$100,000.  A  number  of  these  builders  with  lots  of  nerve 

219 


Practical  Real  Estate  Methods 

and  little  cash  have  come  to  grief;  a  number  have  built 
up  a  fortune  and  a  reputation  by  just  such  methods,  and 
the  building  loan  operators  themselves  have  reaped  a 
golden  harvest  for  the  risk  they  have  taken. 

It  has  been  possible  for  a  man  with  little  capital  to 
finance  a  large  operation,  because  the  operator,  the  loan- 
ing institution,  and  the  speculative  builders  all  have  had 
faith  in  the  value  of  the  property,  and  have  believed  it 
worth  not  only  one  hundred  cents  on  the  dollar  at  cost, 
but  one  hundred  and  ten  cents  for  sale,  and  that  each 
year  will  add  to  the  value  of  the  land,  making  up  for 
the  depreciation  in  the  value  of  the  building. 

Building  loans  in  New  York  City  are  generally  made 
for  one  year  at  6  per  cent  interest,  secured  by  a  mortgage 
on  the  property,  known  as  a  building  loan  mortgage, 
which  has  varied  clauses,  differing  materially  from  other 
mortgages,  and  is  accompanied  by  the  necessary  bond, 
and  by  a  building  loan  agreement,  which  recites,  as  pro- 
vided by  statute,  in  what  manner  and  form  the  building 
loan  will  be  made.  It  is  necessary  to  record  this  build- 
ing loan  contract  as  well  as  the  mortgage,  and  thus  give 
notice  to  those  who  sell  material,  or  do  contract  work 
for  the  builder,  how  much  he  is  to  receive  at  various 
dates.  The  loan  is  generally  made  in  several  or  many 
different  advances,  as  the  work  upon  the  building  pro- 
gresses, and  the  building  loan  contract  recites  these  va- 
rious stages  at  which  money  is  due. 

THREE  SYSTEMS  OF  LOANS 

Discussing  building  loans  as  they  are  negotiated  and 
made,  let  us  take,  for  example,  a  specific  case :  Tenement 
houses  are  the  most  common  form  of  speculative  building 

220 


Building  Loans 

to-day.    Two  lots,  aggregating  50x100  feet  of  land,  will 
therefore  be  our  unit  for  comparison  and  observation. 

There  are  three  ways  in  which  building  operations  are 
financed  in  this  city: 

I.    Operators'  Loans 

First,  where  land  is  owned  by  an  operator  and 
sold  by  him  to  a  builder  at  a  more  or  less  ma- 
terial profit.  To  induce  the  builder  to  pay  this  profit 
a  loan  is  made  to  him  liberal  enough  very  often  to  allow 
him,  with  little  or  no  capital,  to  carry  through  a  sub- 
stantial operation.  The  methods  of  making  a  loan  of 
this  character  are  similar  to  those  described  below  under 
Plan  II.  Under  this  first  plan,  the  loans  are  generally 
more  liberal.  Moreover,  when  finally  a  permanent  loan 
has  been  secured  on  the  completed  building,  the  operator 
is  usually  willing  or  obliged  to  take  a  second  mortgage 
unless  the  permanent  loan  is  sufficient  to  pay  off  his 
building  loan  mortgage  claim.  The  amount  of  loan,  and 
its  terms,  made  by  an  operator  is  therefore  governed 
materially  by  the  profit  he  makes  on  the  sale  of  his  land, 
and  cannot  be  compared  to  the  loans  made  by  building 
loan  companies  to  builders  who  own  their  land. 

II.  Loans  to  Land  Owners 

Taking  again  the  same  fifty-foot  plot  as  typical,  let  us 
assume  that  instead  of  belonging  to  an  operator,  it  be- 
longs to  the  builder,  who  desires  to  improve  it  with  a 
six-story  tenement  house.  He  has  previously  purchased 
the  land  for  $30,000.  He  paid  $5,000  cash  and  gave 
the  seller  a  purchase  money  mortgage  for  $25,000.  He 
goes  to  a  building  loan  company  and  asks  for  $30,000  to 

221 


Practical  Real  Estate  Methods 

assist  him  in  constructing  the  house.  The  building  loan 
company  figures  that  the  land  is  worth  $30,000  and  the 
building  will  cost  $45,000,  making  a  total  cost  of  $75,000. 
If  the  company  loans  the  builder  $30,000,  subject  to  a 
ground  mortgage  of  $25,000,  there  will  be  a  claim  of 
$55,000  against  the  property,  which  will  be  more  than 
70  per  cent  of  the  cost.  The  company  further  figures 
that  when  the  building  is  completed,  the  builder  will  not 
be  able  to  borrow  as  a  permanent  loan  over  $55,000.  It 
does  not  figure  on  what  the  builder  will  sell  the  property 
for,  but  what  it  will  cost,  and  what  permanent  loan  the 
builder  can  get.  If  the  company  is  reasonably  disposed, 
it  offers  the  builder  a  loan  of  $25,000,  subject  to  a  ground 
mortgage  of  $25,000,  making  a  total  loan  of  $50,000, 
or  two-thirds  of  the  total  value — the  common  first  mort- 
gage percentage.  The  fee  for  such  loans  is  small  com- 
pared with  an  operator's  profit,  and  the  amount  of  loan 
is  figured  on  a  different  basis  entirely. 

When  the  builder  makes  application  to  the  building  loan 
man  or  company  for  a  loan,  the  mortgage  on  the  land  is 
most  essential  in  determining  the  amount  to  be  advanced 
for  building.  If  the  builder  had,  instead  of  paying  $5,000 
cash,  paid  $10,000,  his  ground  mortgage  would  be  but 
$20,000,  and  a  building  loan  of  $30,000  would  be  equally 
as  safe  as  a  $25,000  building  loan,  subject  to  a  ground 
mortgage  of  $25,000.  If  the  builder  had  paid  $1,000  on 
account  of  the  land  and  had  a  mortgage  of  $29,000,  the 
building  loan  man  would  not  be  justified  in  offering  over 
$21,000,  although  this  would  be  less  than  50  per  cent  of 
the  cost  of  the  building. 

These  figures  illustrate  the  first  important  deduction 
which  brokers  and  lenders  of  building  loans  must  con- 
sider. Loans  where  the  land  is  owned  by  the  builder, 

222 


Building  Loans 

must  be  calculated  as  if  they  were  first  mortgage  loans, 
and  the  building  loan  must  include  an  amount  sufficient 
to  retire  the  land  mortgage.  It  makes  no  difference  how 
much  mortgage  is  on  the  land,  so  far  as  the  amount  of 
loan  goes ;  if  there  is  no  mortgage  on  it,  the  builder  may 
obtain  all  of  the  loan  to  use  toward  his  building,  but  if  he 
has  a  mortgage  on  the  land,  he  will  have  for  building 
purposes  only  the  difference  between  the  amount  of  the 
loan  and  the  mortgage  on  the  land.  Therefore,  whether 
the  loan  is  to  be  made  as  a  first  mortgage  loan  covering 
the  land  mortgage  and  cost  of  building,  or  second  mort- 
gage loan,  covering  the  cost  of  building  only,  it  must 
always  be  calculated  on  the  basis  of  a  first  mortgage 
loan. 

Another  important  requirement  in  figuring  building 
loan  applications,  is  to  be  able  to  judge  as  to  the  amount 
of  permanent  loan  that  may  be  obtained  on  the  prop- 
erty when  the  building  is  completed.  There  is  no  rule 
to  judge  this  by,  other  than  that  of  experience  and  in- 
vestigation as  to  mortgages  on  adjoining  property  simi- 
larly located  and  of  like  dimensions  and  character. 

The  amount  of  the  mortgage  on  the  land  makes  a  ma- 
terial difference  in  the  manner  in  which  the  building  loan 
payments  are  made.  If  the  land  is  originally  mortgaged 
for  all  it  is  worth,  it  is  obvious  that  the  builder  has  no 
equity  in  his  property  until  he  has  reached  such  a  course 
in  the  construction  of  it  as  to  create  one.  For  instance, 
if  this  5ofoot  plot  of  land  had  a  mortgage  of  $30,000, 
or  for  all  it  was  worth,  it  would  not  be  until  the  build- 
ing was  enclosed  that  it  could  be  said  that  a  reasonable 
equity  of,  say,  $20,000  was  created.  The  property  would 
then  be  worth  $50,000,  and  one  might  reasonably  loan 
two-thirds  of  the  cost  at  that  time. 

223 


Practical  Real  Estate  Methods 

This  is  the  theory  (two-thirds  of  the  cost),  on  which 
some  building  loan  payments  are  arranged  and  based. 
Another,  and  a  more  conservative  theory,  is  to  hold 
back  enough  money  at  all  times  to  complete  the  building. 

Another  vital  fact  in  our  discussion,  is  the  cost  of 
putting  up  the  building.  Without  these  figures  one  cannot 
form  any  judgment  as  to  whether  a  loan  is  good  or  not 
and  how  the  payments  should  be  made.  There  is  no 
exact  rule  for  figuring  the  cost  of  building.  The  only 
absolutely  accurate  method  is  to  take  the  plans  and  speci- 
fications of  each  building,  get  in  bids  on  each  contract, 
add  them  together,  add  allowances  for  extras,  interest, 
carrying  charges,  etc.,  and  the  total  is  what  the  building 
will  cost.  But  while  this  may  be  necessary  for  a  builder 
to  know,  it  is  hardly  necessary  for  the  loan  man  or 
broker,  because  he  can  arrive  at  it  by  less  accurate  and 
easier  methods,  which  vary  according  to  the  character  of 
the  building  proposed.  If,  for  instance,  it  is  such  a  build- 
ing as  a  six-story  tenement,  covering  two  lots — he  may 
roughly  figure  at  so  much  per  front  foot  or  per  cubic 
foot. 

In  figuring  the  cost  of  fireproof  buildings,  the  usual 
way  is  to  figure  by  cubic  contents  only. 

Sometimes  building  loan  operators  do  not  want  to 
make  entire  building  loans  themselves,  and  they  ar- 
range with  a  building  loan  man  or  company  to  advance 
as  much  of  the  loan  as  the  building  loan  company  deems 
proper.  The  building  loan  operator  makes  the  additional 
loan,  by  taking  a  second  mortgage  behind  the  building 
loan  company's  mortgage,  as  security  for  his  advance. 
This  transaction  is  carried  on  in  the  same  way  as  the  one 
just  outlined. 


224 


Building  Loans 

III.  Permanent  Loans 

The  third  class  of  building  loan,  and  one  previously 
referred  to,  is  what  is  known  as  a  building  permanent 
loan,  or  a  loan  made  as  a  permanent  loan  for  three  or 
five  years,  but  advanced  in  building  payments  from  the 
time  the  building  is  started.  These  loans  differ  from 
the  previous  loans  principally  because  they  are  permanent 
investments,  and  are  made  only  by  people  who  seek  in- 
vestment. They  are  the  most  advantageous  loans  a  builder 
can  obtain  as  they  insure  a  certain  fixed  amount  of 
money  to  use  in  speculative  operation  and  relieve  him  of 
the  necessity  on  the  completion  of  his  building,  of  ob- 
taining a  new  mortgage.  Almost  all  of  these  loans  are 
made  by  a  few  of  the  life  insurance  companies,  and  now 
and  then  by  the  title  companies.  It  will  be  recalled  that 
in  speaking  of  the  other  two  kinds  of  building  loans,  that 
the  figures  have  been  based  on  the  value  of  the  land  at 
the  time  that  the  building  is  started,  and  upon  the  cost 
of  the  building.  In  figuring  this  third  class  of  mortgage, 
which  is  a  permanent  investment,  it  must  be  figured  on 
what  the  land  can  fairly  be  estimated  to  be  worth  when 
the  building  is  completed,  and  what  the  building  is  worth 
— not  what  it  costs;  in  other  words,  on  the  total  reason- 
able market  value  of  the  completed  property.  This  makes 
it  possible  to  obtain  a  larger  loan  than  the  ordinary  build- 
ing loan,  and  constitutes  the  difference,  in  amount,  be- 
tween building  and  permanent  loans.  The  rate  of  in- 
terest on  such  loans  is  generally  6  per  cent  during  course 
of  construction,  and  reduced  to  a  lower  rate  after  com- 
pletion. 

Most  of  the  very  large  apartment  houses,  apartment 
hotels,  and  business  buildings,  involving  large  sums  of 

225 


Practical  Real  Estate  Methods 

money  and  built  by  speculative  builders,  have  been  fi- 
nanced in  this  manner. 


How  to  Figure  Payments 

The  following  schedules  of  building  loan  payments  are 
appended,  as  tentative  forms  in  general  use  by  some  of 
the  large  loaning  companies: 

In  figuring  the  amount  of  money  to  be  advanced  on 
each  payment,  there  are  various  methods.  Every  opera- 
tion is  different  and  must  be  figured  independently. 
There  is  no  exact  rule  for  figuring  payments.  Some  very 
general  rules  might  run  as  follows :  It  costs  30  per  cent 
of  the  total  cost  to  enclose  a  five-story  corner  apartment 
house;  35  per  cent  of  the  total  cost  to  enclose  a  six- 
story  inside  elevator  apartment  house,  and  38  to  40 
per  cent  to  enclose  a  six-story  corner  elevator  apart- 
ment house.  It  costs  about  50  per  cent  of  the  total  cost 
to  enclose  a  fireproof  apartment  house,  and  about  60  per 
cent  of  the  total  cost  to  enclose  a  fireproof  loft  building. 
Office  buildings  may  be  figured  on  almost  the  same 
basis  as  apartment  houses. 

If  these  figures  were  to  be  used  as  a  basis,  it  might 
be  proper  to  consider,  if  the  estimated  cost  of  a  six-story 
elevator  apartment  house,  to  be  built  on  a  corner  plot 
100x100,  is  $150,000,  that  it  would  cost  40%  of  this,  or 
$60,000  to  enclose  the  building.  Then  $40,000  would 
be  two-thirds  of  the  cost,  and  the  proper  advance  at  the 
time  the  building  was  enclosed  on  account  of  a  building 
loan  of,  say,  $100,000.  In  addition  to  this,  the  lender 
would  also  advance  two-thirds  of  the  value  of  the  land, 
so  that  in  an  operation  as  above  described,  where  the 
land  was  worth  $90,000  and  the  building  $150,000,  a 

226 


Building  Loans 

building  loan  of  $160,000  would  be  two-thirds  of  the 
estimated  value,  and  the  total  of  all  payments  made  at 
the  time  the  building  was  enclosed  would  aggregate 
$100,000. 

Typical  Schedule  of  Payments  for  a  Six-story 
Elevator  Apartment  House 

1st — When  the  side  and  rear  walls  are  up  to  the  second 
tier  of  beams,  the  second  tier  of  beams  laid,  the  front 
walls  up  to  the  first  tier  of  beams,  and  the  sewers  into 
the  building  line,  out  of  which  sufficient  money  is  to  be 

retained  to  retire  prior  mortgage  of and  accrued 

interest  up  to  date  of  payment 

2nd — When  the  side  and  rear  walls  are  up  to  the  fourth 
tier  of  beams,  the  fourth  tier  of  beams  laid,  and  the  front 
walls  up  to  the  second  tier  of  beams 

3rd — When  the  side  and  rear  walls  are  up  to  the  sixth 
tier  of  beams,  the  sixth  tier  of  beams  laid,  and  the  front 
walls  up  to  the  fourth  tier  of  beams 

4th — When  the  building  is  fully  enclosed,  roof 
watertight,  cornices,  skylights  and  copings  on,  leaders 
from  the  roof  connected  with  the  sewer  

5th — When  the  fireproof  floor  arches  are  set  in  the 
first  tier  of  beams,  studding  and  partitions  are  set, 
rough  flooring  down,  rough  plumbing  completed,  steam 
risers,  gas  pipes,  speaking  tubes  and  electric  wiring 
completed  

6th — When  the  scratch  and  brown  coats  of  mortar  are 
on,  rough  lead  work  completed,  tested  and  accepted 

7th — When  the  white  coat  of  mortar  is  on,  stairs 
stepped  up  with  temporary  treads,  stone  work  all  com- 
pleted, and  boilers  and  hot  water  heaters  set,  elevator 
enclosure  completed  and  elevator  machinery  in  ... 

8th — When  the  standing  trim  including  base  is  com- 
pleted, sashes  in  and  glazed,  tiling  completed,  excepting 
main  hall  on  first  floor,  and  yard  and  cellar  cemented, 
elevator  car  delivered  

•222 


Practical  Real  Estate  Methods 

9th — When  the  doors  are  all  hung,  except  vestibule 
doors,  steam  heating  plant  completed,  excepting  radiators, 
mantels  set,  tubs  and  refrigerators  in,  sidewalks  cemented, 
elevator  car  running 

loth — When  the  building  is  completely  finished,  ex- 
cepting decorations  


Typical  Schedule  of  Payments  for  a  Twelve-story 
Apartment  House 

ist — When  the  structural  steel  work  is  up  to  the 
third  tier  of  beams,  and  the  walls  up  to  the  first  tier  of 
beams,  stair  strings  started 

2nd — When  the  structural  steel  work  is  up  to  the  fifth 
tier  of  beams,  walls  up  to  the  first  tier  of  beams,  and 
three  tiers  of  floor  arches  set,  and  stair  strings  and  risers 
set  to  third  floor  

3rd — When  the  structural  steel  work  is  up  to  the 
seventh  floor,  walls  up  to  the  third  floor,  and  five  tiers 
of  floor  arches  set 

4th — When  the  structural  steel  work  is  up  to  the  ninth 
floor,  walls  up  to  the  fifth  floor,  and  seven  tiers  of 
floor  arches  set  

5th  —  When  the  structural  steel  work  is  up  to  the 
eleventh  floor,  walls  up  to  the  seventh  floor,  and  nine  tiers 
of  floor  arches  set,  rough  plumbing  and  heating  risers 
up  to  sixth  floor  

6th  —  When  the  building  is  enclosed,  roof  on  and 
completed,  leaders  up  and  connected  with  the  sewer, 
copings,  cornices  and  skylights  set,  all  floor  arches  set, 
all  stair  strings  and  risers  set,  and  rough  plumbing 
completed  

7th — When  the  plumbing  is  complete  except  fixtures, 
steam  risers  and  branches  are  all  in,  boilers  in  and  set, 
electric  tubing  in  and  the  sleepers  laid  in  five  floors 

8th — When  all  the  partitions  are  set  throughout  the 
building,  all  sleepers  and  fill  laid,  and  plumbing  tested 
to  approval  of  the  loan  company 

1228 


Building  Loans 

Qth — When  the  brown  coat  of  mortar  is  on,  elevator 
guides  set 

loth — When  the  white  coat  of  mortar  is  on,  jambs 
set,  all  sashes  in  and  glazed,  and  the  balance  of  the  bath- 
rooms tiled  

nth — When  the  standing  trim  is  completed,  including 
base,  doors  hung,  tile  in  main  hall  and  corridor  set,  one- 
half  of  plumbing  fixtures  set 

I2th — When  all  the  finished  floors  are  laid,  doors  and 
other  trim  completed,  hardware  on,  mantels  set,  elevator 
enclosure  completed,  and  elevators  in,  plumbing  com- 
pleted, including  fixtures,  smoke  test  made,  radiators  set, 
elevator  machinery  in  and  stair  marble  set 

1 3th — When  the  building  is  completed,  including  elec- 
tric light  and  gas  fixtures,  in  accordance  with  the  plans 
and  specifications  to  the  satisfaction  of  this  Company  and 
certificates  issued  by  the  Building  and  Tenement  House 
Departments  and  Board  of  Underwriters 


229 


STABILITY  OF  REAL  ESTATE 
DURING  PANICS* 

WALTER  STABLER 

Financial  Conditions  in  1907  Affecting  Real  Estate — 
Mortgages  in  Panic  Months— Effects  of  After  Panic 
Money  Rates — Bonds  Versus  Realty — No  Money 
Lost  on  Mortgage 

THE  enormous  development  and  building  operations 
in  1905  and  1906,  coupled  with  other  conditions, 
resulted  in  higher  rates  for  money.  The  im- 
position of  the  annual  mortgage  tax  in  1905  raised 
the  rates  of  interest  about  a  half  of  one  per  cent. 
But,  what  had  more  to  do  with  higher  rates  of  in- 
terest than  anything  else  was  the  enormous  demand 
for  money  for  every  kind  of  investment.  Five  and 
a  half  and  six  per  cent  money  became  a  regular 
thing,  and  it  was  supposed  this  would  last  for  a  very 
short  time  only,  because  it  did  not  seem  possible  for  it 
to  continue.  But  it  did  last  because  of  the  enormous 
demand  for  money.  About  the  time  we  all  thought  money 
would  ease  up — after  the  recording  mortgage  tax  law 
was  enacted — we  found  that  this  did  not  seem  to  help 
the  situation;  money  became  stiffer  and  stiffer,  and  in 
the  latter  part  of  1907  the  panic  came  when  money  was 
almost  unobtainable.  The  life  insurance  companies,  sav- 

*  Extract  from  paper  read  before  Y.  M.  C.  A.  Real  Estate 
Club,  February,  1909. 

230 


Stability  of  Real  Estate  During  Panics 

ings  banks,  trust  companies  and  title  companies  all 
seemed  to  shut  up;  they  stopped  lending,  because  they 
did  not  have  it  to  lend — that  was  the  whole  story.  The 
savings  banks  during  the  early  days  of  the  panic  put 
the  6o-day  clause  in  operation,  so  that  they  could  not 
have  a  serious  run,  and  they  began  to  call  their  mort- 
gage loans  as  a  matter  of  self-protection,  because  they 
might  be  called  upon  to  pay  all  their  depositors,  and 
the  securities  they  held  had  depreciated  in  some  cases 
ten  to  twenty  points.  They  could  not  be  blamed  for  it. 
Those  demands  had  to  be  met,  and  it  was  difficult  to 
meet  them. 

The  life  insurance  companies  were  called  upon  for 
almost  the  full  amount  of  their  income  to  meet  policy 
loans,  which  their  policy  holders  had  a  right  to  demand, 
and  this  took  them  entirely  out  of  the  lending  market. 

The  trust  companies  were  having  troubles  of  their 
own ;  they  had  no  money  to  lend  daily  borrowers ;  individ- 
uals who  had  money,  hoarded  it  away  for  some  good  op- 
portunity to  buy  things  cheap. 


Effects  on  Mortgages 

And  so  if  you  have  noticed  the  records  of  mortgages 
during  the  six  or  eight  months  that  might  be  called  the 
panic  months,  they  were  smaller  than  for  years,  and  at 
higher  rates  of  interest.  As  the  panic  passed  away,  money 
became  more  plentiful;  then  the  thing  happened  that 
always  does  happen  after  a  panic — money  became  a  drug 
in  the  market,  and  that  is  the  situation  to-day  (February, 
1909).  Rates  are  lower  now  than  they  have  been  for 
eight  or  ten  years.  That  condition,  I  think,  is  likely  to 
last  until  business  development  of  all  kinds  takes  place, 

231 


Practical  Real  Estate  Methods 

and  improvements  by  the  large  corporations  and  the  rail- 
roads have  been  undertaken  again,  so  that  there  is  need 
to  borrow  money. 

The  recording  tax  law  has  undoubtedly  brought  into 
the  market  a  great  deal  of  money  that  was  never  there 
before,  because  estates  can  lend  money  at  4^/2%  net. 
Instead  of  being  liable  to  taxation  at  local  rates,  they  are 
free  from  tax,  and  that  will  encourage  the  investment 
of  money  in  mortgages. 

Future  Conditions 

How  long  this  condition  will  last  no  one  knows,  nor 
can  anyone  prophesy  with  certainty;  but  I  look  for 
tighter  money  by  the  latter  part  of  this  year.  I  am  told 
by  bankers  that  it  is  tending  that  way  now;  but,  mort- 
gage money  is  not  affected  so  quickly  as  that  for  other 
investments,  and  I  think  we  may  look  for  a  very  easy 
market  for  mortgage  loans  during  this  year  and  possibly 
part  of  next  year.  When  the  general  development  begins, 
I  mean  all  over  the  country,  building  operations  in  other 
cities  as  well  as  here,  you  will  find  rates  for  money  will 
be  higher. 

Realty  Versus  Bonds 

The  most  gratifying  thing  about  the  panic  to  me,  and 
I  am  sure  real  estate  men  in  general,  is  the  way  teal 
estate  stood  the  shock.  Stocks  of  all  kinds  were  cut  more 
than  in  half,  many  bonds  were  in  default,  and  no  inter- 
est was  paid.  But,  when  you  look  back  over  this  period 
of  stress  and  call  to  mind  how  little  depreciation  has 
taken  place  in  real  estate  values,  and  see  how  few  fore- 
closures there  have  been,  it  is  very  gratifying.  I  have 
not  seen  statistics  on  the  subject,  but  I  believe  there 

232 


Stability  of  Real  Estate  During  Panics 

have  been  fewer  foreclosures  during  this  period  than  in 
normal  times.  One  reason  was  that  every  lender  of 
money  felt  it  was  his  duty  to  the  community  to  be  as 
easy  on  the  borrower  as  possible.  That  stopped  a  great 
many  foreclosures.  That  cannot  be  said  about  any  other 
form  of  investment.  A  West  Side  broker,  speaking  to 
me  during  the  panic,  said  he  had  been  approached  by  a 
customer  to  sell  some  real  estate  that  probably  had  not 
paid  as  well  as  he  expected.  The  customer  was  told  it 
was  not  a  very  good  time  to  sell.  The  owner  said,  "Why, 
I  can  sell  anything  else  without  any  trouble,"  and  the 
broker's  reply  was,  "If  you  will  sell  your  real  estate  at 
twenty-five  per  cent  of  the  loss  your  bonds  and  stocks 
would  show,  I  will  sell  it  for  you  in  five  minutes."  And 
that  is  the  answer  that  can  be  given  in  regard  to  real 
estate  in  all  sections  during  the  whole  of  that  time. 
Mortgage  investors  have  lost  no  money.  I  do  not  believe 
there  is  a  man  who  has  had  an  honest,  well-invested  mort- 
gage who  has  lost  anything  on  it. 

This  lesson  will  have  its  effect  on  investors  generally. 
I  believe  that  the  savings  banks  will  put  a  larger  pro- 
portion of  their  funds  in  mortgage  loans,  for  the  reason 
that  they  know  that,  while  they  might  not  be  able  to  go 
out  in  the  market  and  sell  them  in  a  hurry,  they  will  not 
have  to  do  any  marking  off,  and  are  certain  to  get  their 
money  some  time.  The  life  insurance  companies  had  to 
mark  off  their  assets  to  the  extent  of  from  ten  to  fifteen, 
yes,  to  twenty  per  cent  of  the  value  of  their  bonds.  While 
they  were  worth  to  them  as  much  as  before,  in  making 
their  report  to  the  State  Department,  they  had  to 
mark  them  off.  With  some  savings  banks  and  life 
insurance  companies,  it  would  mean  insolvency  if  they 
had  been  obliged  to  sell  securities  at  the  market 

233 


Practical  Real  Estate  Methods 

price.  That  was  not  necessary  with  mortgages,  and 
while  holding  them  they  have  received  one  to  one  and 
a  half  per  cent  better  interest  than  on  other  investments. 
A  larger  investment  will  be  made  in  bonds  and  mort- 
gages, I  think,  in  the  future  than  ever  before,  and  that 
is,  of  course,  always  to  the  advantage  of  real  estate  in- 
terests generally. 


234 


OPERATING 

ROBERT  E.  SIMON 

Value  of  Real  Estate  History — Disregard  of  Prec- 
edent— Trend  of  Trade  and  Movements  of  Centers 
— Economic  Studies — Creating  Values — Vacant  Land 
and  Its  Dangers — Building  Financing — Acreage 

THE  real  estate  operator,  at  one  time,  was  a  drone 
in  the  community.  He  was  really  a  real  estate 
speculator,  would  buy  to  sell  at  a  profit,  but  would 
do  nothing  himself  to  create  increased  value.  To-day, 
realty  operating  is  a  profession,  and  the  speculative  side 
is  very  unimportant. 

There  are  as  many  specialists  among  real  estate  oper- 
ators as  there  are  classes  of  property;  in  addition,  there 
are  those  who  deal  in  all  classes  of  real  estate. 

The  essentials  for  successful  dealing  in  real  estate  are 
foresight  and  imagination,  a  reputation  for  honesty  and 
square  dealing;  a  thorough  knowledge  of  the  growth 
and  development  of  the  city,  of  the  requirements  and 
peculiarities  of  its  people,  and  of  its  various  centers ;  and 
last,  but  not  least,  capital.  I  put  capital  last  because,  with 
the  other  requirements  developed,  it  is  very  easy  to  get 
capital  in  a  big  city.  There  are  always  a  large  number 
of  people  with  idle  capital  to  back  the  opinion  of  an 
expert.  Many  of  our  most  successful  real  estate  oper- 
ators of  to-day  made  their  beginning  in  just  this  way, 
receiving  a  share  of  the  profits  for  investing  the  money 
of  others. 

235 


Practical  Real  Estate  Methods 

Must  Know  Realty  History 

How  is  one  to  gain  the  necessary  knowledge?  By 
close  study  of  conditions  as  they  were  and  now  are  in 
the  thickly  populated  sections;  by  watching  the  shifting 
of  neighborhoods,  the  increase  of  population  and  its 
sources,  the  increase  of  wealth  and  commerce  and  their 
sources  and  distribution;  by  trying  to  see  where  history 
should  and  would  repeat  itself  and  anticipate  it ;  by  study- 
ing the  financing  of  real  estate  and  profiting  by  the  mis- 
takes of  others.  In  short,  the  successful  real  estate  op- 
erator should  be  a  veritable  encyclopedia  of  the  activities 
of  his  city,  and  particularly  of  his  own  section,  if  he  is 
a  specialist. 

For  example,  it  is  evident  that  a  wide  street  has  a  greater 
value  than  a  narrow  one  in  the  same  neighborhood.  It 
affords  more  light  and  air ;  its  capacity  for  handling  traf- 
fic, vehicular  and  pedestrian,  is  larger.  It  is  also  evident 
that  a  long  thoroughfare  leading  to  and  passing  through 
important  centers  has  greater  possibilities  than  a  short 
street,  beginning  at  no  particular  point  and  leading  to  no 
specific  place.  So  we  find  in  New  York  that  in  turn 
Grand,  I4th,  23d,  34th,  42d,  and  all  the  wide  streets 
throughout  the  city  and  its  suburbs;  and  Broadway, 
Fifth  Avenue,  and  the  other  north  and  south  thorough- 
fares are  more  or  less  important  according  to  the  sec- 
tions they  intersect;  and  that  as  a  consequence,  when  a 
wide  cross  street  intersects  a  prominent  long  thorough- 
fare, the  junction  is  usually  important,  and  the  values 
at  such  a  point  are  greater  than  any  other  in  the  vi- 
cinity. 

But  it  is  the  value  peculiar  to  each  such  intersection  or 
neighborhood  that  commands  study.  The  keenest  fore- 

236 


Operating 

sight  reaps  the  largest  profits.  It  is  not  so  many  years 
ago  that  the  corner  of  34th  Street  and  Fifth  Avenue  went 
begging,  and  that  the  wiseacres  shook  their  heads  and 
wondered  what  the  Tabernacle  at  34th  Street  and  Broad- 
way could  be  utilized  for  at  the  price  at  which  it  was 
then  held.  And  yet  to-day  both  of  these  corners  are 
worth  and  would  find  ready  sale  at  many  times  the  for- 
mer prices. 

Disregard  of  Precedent 

Often  originality  and  nerve  will  prompt  a  man,  be- 
cause of  recognized  peculiar  conditions,  to  throw  all 
precedent  to  the  wind  and  win  out.  Just  as  Henry  Siegel, 
in  the  face  of  the  accepted  opinion  that  the  west  side 
of  a  north  and  south  thoroughfare  is  much  better,  built 
on  the  east  side  of  Sixth  Avenue,  i8th  and  iQth  Streets. 
Not  only  has  the  business  been  a  marvelous  success,  but 
the  entire  east  side  of  Sixth  Avenue,  from  I4th  to  i8th 
Streets,  has  been  benefited. 

His  reasons,  no  doubt,  were  as  follows:  Noticeably 
peculiar  to  that  particular  section  between  I4th  and 
23rd  Streets,  Broadway  and  Sixth  Avenue,  at  that 
time,  $1,500,000  was  being  annually  spent  by  merchants 
in  the  advertising  of  dry  and  furnishing  goods.  This 
made  that  section  the  retail  shopping  centre  of  the  city. 
Fourteenth  and  23rd  Streets  were  best  between  Fifth 
and  Sixth  Avenues;  therefore  it  should  be  easy  to  draw 
some  of  the  traffic  to  the  east  side  of  Sixth  Avenue,  as 
it  was  the  nearest  point  between  these  important  dis- 
tricts. It  is  readily  seen  that  this  same  reasoning  would 
not  hold  good  everywhere.  And  so,  again,  owing  to 
the  Altman  and  Macy  stores,  has  the  lot  value  on  the 
north  side  of  34th  Street  developed  to  equal,  if  not 

237 


Practical  Real  Estate  Methods 

greater,  value  than  on  the  south  side,  although,  with 
the  exception  possibly  of  42nd  Street,  owing  to  the  park, 
the  land  value  on  the  north  side  of  almost  every  other 
wide  business  street  is  worth  one-half  of  that  on  the  south 
side,  or  even  less. 

It  is  in  this  way  that  real  estate  history  is  made  and 
should  be  studied. 

Noting  Trend  of  Trade 

One  usually  finds  that  land  in  recognized  centers,  such 
as  hotel,  club,  theatre  and  amusement,  shopping,  manu- 
facturing centers,  etc.,  has  a  peculiar  value.  Then  it 
is  necessary  to  know  the  requirements  for  proper  im- 
provements, such  as  the  capacity  of  a  building  necessary 
to  create  a  paying  investment,  the  amount  of  land  needed, 
the  proportion  which  can  be  built  upon,  the  cost  of 
construction,  the  income  desired,  and  the  transit  facilities. 
The  center  of  population,  which,  in  a  growing  city,  is 
constantly  changing,  must  be  carefully  watched  to  ap- 
preciate when  it  is  time  for  a  shifting  of  these  centers 
for  the  convenience  of  the  citizens.  Comparatively  young 
men  have  seen  the  theatre  centers  change  from  below 
Astor  Place  to  Union  Square,  next  to  Herald  Square, 
then  Times  Square,  and  now  from  Columbus  Circle  to 
Lincoln  Square,  with  I25th  Street  and  Seventh  Avenue 
and  I49th  Street  and  Third  Avenue  as  additional  centers. 
So  also  have  the  hotels  and  clubs  moved  northward,  as 
they  naturally  continue  to  follow  the  residential  portion 
of  the  city. 

Economic  Studies 

To  be  able  to  judge  whether  we  have  overproduction 
in  housing  facilities,  the  operator  must  be  in  touch  with 
immigration,  with  the  natural  growth,  and  the  increased 

238 


Operating 

demand  through  marriages,  etc.;  also  with  the  class  of 
dwelling  needed;  whether  we  have  too  many  high-class 
and  too  few  cheap  apartments;  whether  the  scale  of 
wages  permits  paying  for  better  facilities,  etc.  All  of 
these  things  are  not  the  result  of  guess  work  nor  chance, 
but  of  constant  study,  careful  observation  and  applica- 
tion. This  study  also  discloses  the  extravagances  of  a 
community,  thus  regulating  the  rentals  of  shops  and 
stores,  especially  on  select  streets,  such  as  Fifth  Avenue 
and  its  side  streets.  As  the  land  value  is  regulated  by 
its  income-bearing  possibilities  the  wealth  of  the  com- 
munity is  an  important  factor. 

The  financing  of  real  estate  is  extremely  important. 
It  is,  at  times,  complicated,  depending  largely  on  the 
class  of  real  estate  dealt  in.  This  will  be  discussed  later. 

I  have  attempted  to  show  how,  largely  by  comparison, 
one  arrives  at  real  estate  values,  and  why  I  put  fore- 
sight and  imagination  first  in  my  list  of  requisites. 

Real  estate  operators  can  be  divided  into  six  classes: 
Those  who  deal,  1st,  in  business  property;  2nd,  in  private 
residential  property ;  3rd,  in  apartments  or  flat  property ; 
4th,  in  vacant  land  generally  or  land  adapted  to  any 
specific  purpose;  5th,  in  factory  and  stable  property; 
6th,  in  all  kinds  of  real  estate.  Each  class  has  its  own 
peculiarities.  The  general  rules  which  I  have  outlined 
apply  to  all  classes. 

Creating  Values 

Dealers  in  improved  property  can  do  many  things  to 
create  additional  value.  They  can  modernize  old  build- 
ings by  putting  in  modern  show  windows,  which  will 
result  in  increased  rental ;  by  changing  a  loft  to  an  office 
building,  or  vice  versa;  by  changing  an  old  dwelling 

239 


Practical  Real  Estate  Methods 

into  a  combination  store  and  loft,  office  or  bachelor 
apartment;  by  putting  in  a  passenger  elevator  where 
there  was  none.  They  can  increase  income  by  reducing 
expenses,  changing  the  heating  plant,  or  taking  out  an 
old  style  hydraulic  elevator  which  consumes  coal  summer 
and  winter  and  requires  a  high-priced  engineer,  for  one 
of  the  electric  type.  In  private  dwellings  they  can  change 
the  front  and  turn  a  high  stoop  into  an  American  base- 
ment, put  in  modern  plumbing,  add  an  extension  or 
another  story,  or  install  an  electric  elevator.  In  apart- 
ments they  can  change  the  combination  or  the  number 
of  rooms,  modernize  the  entrance  hall,  redecorate,  and 
put  in  open  plumbing  or  steam  heat;  or  furnish  better 
elevator  and  hallboy  service,  etc. 

In  some  cases  no  structural  change  is  necessary.  The 
operator  can  realize  a  profit  by  increasing  the  net  return 
through  procuring  a  more  desirable  mortgage,  either 
in  amount  or  rate  of  interest.  Or  he  may  buy  the 
land,  regardless  of  the  value  of  the  building,  because 
he  realizes  that  the  property  is  worthy  of  a  better  or 
different  type  of  improvement  and  figures  on  its  dem- 
olition. 

It  is  most  important  in  purchasing  improved  property 
to  be  certain  either  that  the  building  is  or  can  be  made 
suitable  to  the  character  of  the  neighborhood's  needs. 
One  must  know  the  value  of  the  structure.  But  very 
often,  though  the  land  has  a  fixed  value,  a  purchaser  will 
pay  far  in  excess  of  this  value,  plus  what  it  would  cost 
to  construct  the  building  erected  thereon.  This  is  due 
to  the  income  the  building  is  capable  of  producing  when 
the  value  of  this  property  is  figured  on  an  income  basis. 

Many  operators,  anticipating  a  change  in  the  neigh- 
borhood, rent  an  old  building  for  what  it  will  bring, 

240 


Operating 

and  carry  the  property  at  a  loss  until  they  can  realize 
a  profit  from  someone  who  will  tear  it  down  or  alter  it. 

In  changing  neighborhoods,  it  is  desirable  to  take  less 
rental  and  have  leases  so  arranged  that  they  can  be 
cancelled  and  possession  had  at  a  given  time.  Sometimes 
it  is  necessary,  in  order  to  find  a  tenant  under  these 
conditions,  to  stipulate  a  sum  to  be  paid  should  posses- 
sion be  desired  before  the  specified  termination  of  the 
lease. 

It  is  almost  invariably  the  operator  who  discloses  to 
the  public  the  possibilities  of  a  new  section.  He  is  the 
pioneer  and  deserves  reward  for  his  foresight.  Not  in- 
frequently, however,  he  is  too  far  ahead  of  the  times; 
is  unable  to  hold  out  until  his  anticipations  are  realized, 
and  suffers  losses.  Take,  for  example,  a  man  like  Ham- 
merstein,  who  foresaw  the  great  future  of  I25th  Street 
and  built  the  Harlem  Opera  House  and  the  now  Proctor's 
Theatre  near  Park  Avenue.  He  then  anticipated  the 
great  theatrical  center  at  Times  Square  and  built  the 
New  York  Theatre  block  on  Longacre  Square,  be- 
tween 44th  and  45th  Streets  on  Broadway.  He  had  to 
sacrifice  the  i25th  Street  properties  to  try  to  save  the 
Longacre,  and  then  lost  that.  He  was  then  laughed  at 
for  his  follies;  but  it  is  only  a  few  years  ago  that  the 
New  York  Theatre  was  sold  for  less  than  a  million 
dollars,  and  to-day  it  is  worth  much  over  two  millions. 
Though  many  lost  money  on  Fifth  Avenue  property, 
between  26th  and  42nd  Streets,  to-day  it  is  as  scarce 
as  rare  diamonds. 

Vacant  Land 

The  improvement  and  financing  of  land  where  build- 
ings are  demolished  and  new  ones  erected  are  the  same 

241 


Practical  Real  Estate  Methods 

as  those  of  vacant  land  and  will  be  taken  up  later. 
The  operator  in  vacant  land  has  the  hardest  row  to 
plow.  His  capital  is  invested  with  no  return  until 
the  property  is  improved  and  rented;  not  only  has  he 
no  income,  but  in  addition,  he  has  the  carrying  charges, 
taxes  and  interest,  and  sometimes  assessments,  increasing 
his  cost  daily.  How  this  amounts  up  can  best  be  realized 
by  actual  figures.  Take  a  plot  worth  $100,000,  mort- 
gaged for  $60,000  at  5% : 

Interest  on  mortgage,  per  annum $3,000.00 

Interest  on  capital  invested,  $40,000,  at  6% 

per  annum  2,400.00 

Taxes  at  1.70   1,700.00 

This  amounts  to  $7,100  per  annum,  or  about  $19.50 
per  day,  or  80  cents  every  hour  of  the  day,  not  allowing 
anything  for  assessments,  while  he  is  waking  or  sleep- 
ing, and  this  increases  or  decreases  in  proportion  to 
the  value  of  the  land. 

In  purchasing  vacant  land  it  is  important  therefore 
that  one  consider  these  carrying  charges,  for  in  case 
the  property  is  not  sold  quickly  the  growth  and  future 
value  of  it  should  be  sufficient  to  show  a  profit  over 
and  above  the  cost  and  carrying  charges.  In  addition, 
the  operator  should  know  for  what  class  of  improvement 
the  property  is  suitable,  and  how  it  could  be  financed 
should  building  be  commenced. 

Building  Financing 

Sometimes  the  operator  buys  and  sells  the  vacant  land 
and  secures  a  profit.  He  may  sell  and  only  get  back  a 
part  of  his  cash  invested,  and  a  second  mortgage  for  the 
balance;  or  he  may  sell  to  someone  desiring  to  improve 

242 


Operating 

and  agree  to  advance  a  share  of  the  money  necessary 
for  the  cost  of  the  building;  or  he  may  not  advance  any 
of  the  construction  money,  but  agree  to  go  (with  a 
second  mortgage)  behind  such  a  sum  borrowed  else- 
where. The  first  two  cases  are  very  simple.  In  the 
third,  the  operator  makes  what  is  called  a  building  loan ; 
that  is,  he  agrees  to  take  back  a  first  mortgage  (only 
in  very  rare  cases  is  a  building  loan  made  as  a  second 
mortgage)  for  a  sum  representing  the  mortgage  on  the 
land,  plus  an  amount  which  he  agrees  to  lend  toward 
the  construction  of  the  building.  As  the  building  pro- 
gresses the  money  is  paid  in  instalments,  called  payments, 
which  are  stipulated  and  set  forth  in  the  building  loan 
mortgage,  placed  on  record. 

In  making  such  a  mortgage,  the  operator  has  many 
things  to  watch  for:  first,  that  his  builder-purchaser  is 
competent  and  has  a  good  reputation  in  the  trade ;  second, 
that  the  building  he  purposes  erecting  is  properly  planned 
and  suitable  to  the  needs  for  which  it  is  intended  and 
the  neighborhood  in  which  it  is  to  be  erected ;  third,  that 
the  builder  is  financially  able  to  complete  the  structure; 
and  fourth,  that  his  payments  are  equitably  distributed, 
so  that  the  builder  will  at  all  times  have  sufficient  money 
to  meet  his  bills  and  yet  will  not  get  more  money  than 
the  value  of  the  work  done  at  the  time  of  payment  safely 
warrants.  All  of  this  takes  a  thorough  knowledge  of 
the  real  estate  and  building  business  and  a  keen  head 
for  financing. 

The  operator  has  various  methods  of  financing  a 
building  loan:  first,  having  sufficient  money  of  his  own 
to  make  all  payments;  second,  selling  the  building  loan 
in  its  entirety  to  someone  who  will  take  it  over  and  make 
the  payments  either  directly  to  the  builder  or  through 

243 


Practical  Real  Estate  Methods 

the  operator  (in  both  cases  the  operator  frequently  guar- 
antees the  completion  of  the  building)  ;  third,  by  hypoth- 
ecating the  building  loan  and  borrowing  a  portion  of 
it,  financing  the  balance  himself 

Owing  to  the  recent  stringency  in  the  money  market, 
it  has  become  customary  for  the  builder  to  try  to  procure 
a  building  loan  which  shall  become  a  permanent  mortgage 
when  the  building  is  completed.  The  building  loan  other- 
wise is  a  temporary  mortgage  only  and  comes  due  at  a 
specified  time  after  the  completion  of  the  building. 

The  operator  often  reaps  large  profits  by  purchasing 
a  number  of  lots  in  an  undeveloped  section,  selling  off 
a  portion  for  improvement  and  realizing  a  bigger  price 
for  the  balance.  He  also  creates  value  by  taking  land 
supposedly  suitable  for  five  or  six-story  buildings  and 
improving  it  with  six  or  eight  or  ten  stories,  thereby 
greatly  increasing  the  income. 

One  other  form  of  handling  vacant  lots  in  a  fast 
growing  section  is  to  erect  one-story  stores.  These  bring 
in  an  income,  stop  the  increased  cost  of  land  due  to 
taxes  and  interest,  and  can  be  readily  torn  down  when 
the  neighborhood  has  developed.  Such  an  improvement 
is  commonly  called  a  "taxpayer/* 

Acreage 

Another  field  for  operating  in  vacant  land  is  the  pur- 
chasing of  acreage  and  its  development  into  city  lots, 
by  cutting  through  streets,  laying  sewers,  paving,  etc. 
Such  property  is  sometimes  sold  at  auction  before  any 
physical  improvements  have  been  made,  or  sold  in  lots 
or  plots,  after  improvements  have  been  made,  at  auction 
or  at  private  sale.  Acreage  property  also  must  be  care- 

244 


Operating 

fully  financed.  The  most  desirable  method,  from  the 
operator's  standpoint,  if  he  cannot  or  does  not  wish  to 
pay  all  cash,  is  to  procure  a  blanket  mortgage,  which  is 
a  mortgage  covering  the  whole  purchase,  with  release 
and  substitution  clauses;  that  is  to  say,  with  the  holder 
of  the  mortgage  agreeing  to  release  any  portion  of  the 
property  desired  from  the  blanket  mortgage,  and,  if 
desired,  taking  a  separate  mortgage  on  the  parcel  so 
released. 

Many  operators  sell  these  lots  on  the  instalment  plan, 
in  which  case  the  purchaser  should  be  careful  to  assure 
himself  before  signing  his  contract  that  the  seller  has 
made  proper  arrangements  to  deliver  the  land  purchased, 
free  and  clear,  at  the  time  the  last  payment  is  made. 
Sometimes  land  is  sold  where  there  is  a  blanket  mort- 
gage ;  then,  when  the  time  for  delivering  the  deed  arrives, 
the  seller  cannot  give  a  good  title,  because  he  cannot 
release  it  from  the  blanket  mortgage  and  has  not  money 
at  hand  to  pay  off  the  whole  mortgage. 

A  good  example  of  what  can  be  done  in  the  way  of 
developing  acreage  property  can  be  seen  in  the  Hunts 
Point  section  of  the  Bronx,  where  about  three  thousand 
city  lots  are  being  improved  by  building  only  the  best 
two  family,  four  and  five  story  houses,  and  even  six 
stories  with  elevators.  This  has  created  a  model  section 
of  the  city,  and  increased  land  value  from  the  price  per 
acre  to  the  price  per  25  foot  lots. 

So  we  see  that  the  operator  has  ceased  to  be  a  gambler 
and  has  become  a  potent  factor  in  the  development  of 
social  welfare.  He  is  even  a  benefactor  to  the  com- 
munity. No  one  will  dispute  that  the  mere  fact  of 
his  making  a  profit  or  good  return  on  his  investment 
detracts  from  the  fact  that  he  is  constantly  increasing 

245 


Practical  Real  Estate  Methods 

the  income  and  credit  of  the  city  through  the  greater 
tax  value  he  creates;  that  he  is  studying  and  experi- 
menting to  improve  the  housing  conditions  of  the  in- 
habitants ;  that  he  is  furnishing  employment  for  armies 
of  workmen ;  that  through  modern  construction,  he  tends 
toward  increasing  the  business  of  the  shopkeeper,  mer- 
chant and  manufacturer,  and  that  he  is  accomplishing 
this  through  a  legitimate  business  along  scientific  lines. 


246 


WHAT  TITLE  INSURANCE  IS 

PHILIP  S.  DEAN 

Nature  of  Title  Insurance— What  Policies  Guarantee 
— What  They  Do  Not  Cover — Character  of  Agree- 
ment— Actual  Protection — How  Policies  Are  Voided 
— Importance  of  Covenant  and  Warranty 

TITLE  insurance  deals  solely  with  titles  to  real 
estate  and  interests  in  and  liens  upon  real 
estate.  Its  purpose  is  to  guarantee  owners 
and  other  persons  interested  against  loss  arising  from 
defects  in  the  title  to  such  properties,  or  from  the  un- 
marketability  of  such  titles.  This  guarantee  is  in  the 
form  of  a  policy  and  is  issued  by  a  corporation  which, 
in  this  State,  must  have  a  minimum  capital  of  $150,000. 
The  policy  is  issued  after  an  examination  of  the  title 
by  experts  in  the  employ  of  the  company,  and  the  person 
who  is  applying  for  the  insurance  is  informed  by  an 
elaborate  written  report  some  days  before  he  acquires 
the  title,  of  the  exact  condition  of  the  title  as  disclosed 
by  the  examination.  The  policy  thereafter  issued  to 
him  is  substantially  a  contract  by  the  title  company  that 
the  title  is  in  the  condition  shown  by  its  report,  and  that 
if  it  is  not,  the  title  company  will  reimburse  the  assured 
for  any  loss,  not  exceeding  the  amount  stated  in  the 
policy,  arising  from  any  discrepancy.  The  title  policy 
contains  four  general  agreements: 

247 


Practical  Real  Estate  Methods 
What  Policies  Guarantee 

First,  it  guarantees  that  the  title  is  marketable.  The 
marketability  of  the  title  is  its  most  important  attribute, 
implying  as  it  does  that  the  title  is  one  which  a  purchaser 
can  be  compelled  by  the  courts  to  take.  An  owner 
having  a  policy  insuring  that  his  title  is  marketable  knows 
that  he  can  compel  any  person  who  contracts  to  take 
the  title  to  fulfill  his  contract  or,  if  the  courts  relieve 
him,  the  title  company  will  stand  the  loss. 

Second,  the  policy  states  and  guarantees  the  exact 
condition  of  the  title,  and  at  a  glance  the  owner  is 
informed  as  to  the  liens  on  his  property  or  any  ob- 
jections to  the  title. 

Third,  the  policy  is  an  engagement  to  pay  the  cost  of 
any  litigation  affecting  the  property. 

Fourth,  the  policy  guarantees  that  if  the  assured  sells 
the  property  with  warranties,  he  shall  suffer  no  damage 
by  reason  of  any  defects  in  the  title,  for  which  he  would 
otherwise  be  liable  on  these  warranties. 

The  amount  in  which  the  company* will  reimburse  the 
assured  for  loss  is  limited  to  the  amount  stated  in  the 
policy.  The  policy  is  not  assignable  and  protects  only 
the  assured.  One  reason  for  this  is  that  only  a  single 
premium  is  exacted.  There  are  no  annual  premiums  on 
title  policies. 

Nature  of  Policy 

The  policy  itself  consists  of  a  number  of  printed  pages 
on  which  are  written  the  name  of  the  assured,  the  de- 
scription of  the  property  insured  and  the  defects  or 
incumbrances  affecting  the  title,  and  against  which  the 
company  assumes  no  liability.  The  description  of  the 
property  is  contained  in  what  is  known  as  Schedule  "A." 


What  Title  Insurance  Is 

Schedule  "B"  contains  a  statement  of  the  defects  and 
incumbrances  against  the  title,  and  this  schedule  every 
assured  should  carefully  scrutinize,  or  he  may  find  the 
policy  a  disappointment.  He  should  take  nothing  for 
granted.  When  an  assured  sells  he  should  make  a  con- 
tract which  conforms  to  the  policy;  that  is  to  say,  the 
contract  should  contain  the  description  of  the  property 
contained  in  the  policy,  and  the  assured  should  not  agree 
to  sell  except  subject  to  the  incumbrances  and  defects, 
if  any,  shown  in  the  policy.  Unless  this  is  done,  he  may 
find  he  has  lost  the  protection  of  the  policy,  because  the 
insuring  company  only  agrees  to  enforce  a  contract  of 
sale  made  in  accordance  with  the  policy.  The  printed 
portions  of  the  policy  contain  the  conditions  on  which 
the  insurance  is  made  and  are  fair  and  unobjectionable. 

Actual  Protection 

The  actual  protection  afforded  by  the  policy  may  be 
classified  under  two  heads: 

First — Where  the  title  is  good  and  marketable,  and 
in  the  condition  which  the  policy  states ;  and 

Second — Where  it  is  not  marketable  and  is  "not  in  the 
condition  which  the  policy  states. 

In  the  first  of  these  cases,  where  the  title  is  marketable 
and  in  the  condition  stated  in  the  policy,  the  only  loss 
for  which  the  insuring  company  will  reimburse  the 
assured  is  the  cost  of  litigation  to  defend  and  enforce 
the  title  insured. 

Incidental  losses  are  not  covered  in  this  instance.  A 
policy  holder  should  understand  this  clearly.  Take  this 
instance:  An  assured  desires  to  sell  the  property,  title 
to  which  has  been  insured  to  him.  He  makes  a  contract ; 

249 


Practical  Real  Estate  Methods 

the  purchaser  declines  to  take  the  title,  affirming  that 
it  is  bad.  The  assured  may  be  delayed  in  obtaining  the 
purchase  money  and  in  enforcing  the  contract,  and  suffer 
loss  of  interest  or  other  incidental  losses,  consequent 
on  such  delay,  but,  assuming  that  the  title  is  ultimately 
held  by  the  courts  to  be  good,  the  policy  gives  no  other 
protection  than  covering  the  cost  of  the  litigation  nec- 
essary to  compel  the  purchaser  to  take  the  title. 

In  the  second  case,  where  the  title  is  not  in  the  con- 
dition which  the  policy  states,  the  company  will  respond 
for  loss  of  every  sort,  incidental  or  otherwise,  resulting 
from  defects  in  the  title,  but  not  exceeding  the  amount 
stated  in  the  policy;  so  that,  generally  speaking,  in  the 
case  of  titles  which  are  defective,  but  which  a  policy 
has  insured  as  good,  the  policy  holder  is  reimbursed  for 
all  his  losses,  up  to  the  amount  stated  in  the  policy. 

How  Policies  Are  Voided 

All  policies  of  title  insurance  require  the  utmost  good 
faith  on  the  part  of  the  assured.  They  must  notify  the 
company,  before  applying  for  the  insurance,  of  any  ques- 
tions affecting  the  title,  of  which  they  have  notice,  and 
their  failure  to  do  so  may  invalidate  their  policies. 

After  the  policy  has  been  issued,  when  a  claim  is 
made  against  the  title  insured,  the  policy  holder  must 
at  once  notify  the  company,  in  order  that  it  may,  at 
once,  take  such  steps  as  it  may  deem  wise  to  protect  the 
assured  and  itself.  It  has  also  the  absolute  right  to 
conduct  any  litigation  with  regard  to  the  title,  and  the 
assured  stipulates  that  his  name  may  be  used  for  this 
purpose,  the  company,  of  course,  paying  all  charges  of 
every  sort  incidental  to  such  litigation. 

250 


What  Title  Insurance  Is 

The  company  also  has  the  right,  in  case  there  is  a 
defect  in  the  title  resulting  in  a  loss  paid  to  the  assured, 
to  avail  itself  of  any  covenant  or  warranty  which  the 
assured  may  have,  giving  him  a  claim  against  some  other 
person,  by  reason  of  such  defect.  This  is  an  important 
right  which  the  assured  is  bound  to  preserve  harmless 
to  the  company,  and  if  he  releases  or  impairs  it,  he  may 
thereby  invalidate  his  policy. 

Title  insurance  companies  cannot  insure  every  risk 
that  is  offered  to  them.  In  this  particular  they  resemble 
other  insurance  companies.  They  cannot  risk  their  cap- 
ital by  the  assumption  of  unusual  and  extra  hazardous 
risks.  It  is  their  aim,  and,  of  course,  is  greatly  to  their 
interest,  to  insure  every  title  that  is  offered,  and  they 
are  resourceful  and  ingenious  in  suggesting  ways  of 
curing  defective  titles  and  aiding  owners  to  perfect  their 
titles,  so  that  they  may  be  insured.  A  title  once  insured 
is  a  likely  source  of  future  profit  to  the  company.  Having 
once  examined  it,  the  company  can  continue  its  examina- 
tion to  a  new  purchaser  at  a  minimum  cost,  and  the  fact 
that  a  title  is  insured  makes  it  more  desirable  and  easily 
transferable. 

Title  companies  have  added  greatly  to  the  negotiability 
of  real  estate,  owing  to  the  speed  with  which  titles  can 
be  examined,  through  the  instrumentality  of  the  exten- 
sive plants  and  large  forces  of  the  companies.  The  long 
delays  incident  on  the  examination  of  titles  by  lawyers 
are,  to  a  great  extent,  things  of  the  past,  and  at  no 
distant  day,  it  is  believed  that  the  companies  will  have 
approximated  the  ideal  toward  which  they  are  aiming — 
making  a  transfer  of  real  estate  with  the  same  rapidity 
that  transfers  of  stocks  and  bonds  are  now  effected  on 
the  Stock  Exchange. 

251 


FIRE  INSURANCE 

R.  O.  HAUBOLD 

The  Successful  Broker— The  Standard  Policy  and  Its 
Provisions — Legal  Points  to  Be  Considered — Need 
for  Including  Certain  Clauses — Structural  Changes — 
Forms  of  Insurance — Average  Clause*— Inclusion  of 
Machinery 

IN  order  to  be  successful  as  a  broker,  the  first  step 
necessary  is  to  realize  that  in  becoming  a  broker  and 
accepting  an  order  to  place  a  policy  of  insurance,  you 
are  assuming  a  confidential  relationship  to  your  client, 
and  he  looks  to  you  to  see  that  you  are  going  to  give 
him  protection  against  possible  loss  by  fire. 

A  fire  insurance  policy  is  a  contract  between  your 
client  and  the  company,  the  conditions  of  which  have 
been  prescribed  by  the  Legislature  of  the  State  of  New 
York,  and  it  is  as  obligatory  for  the  assured  to  live  up 
to  these  conditions  as  it  is  for  the  company  to  pay  the 
loss  when  it  occurs. 

In  the  vast  majority  of  cases,  the  assured  is  unfamil- 
iar with  these  conditions,  and  it  is  your  duty  to  see  that 
the  contract  is  so  worded  that  such  contingencies  as 
may  arise  in  the  business  or  occupation  of  the  assured 
are  provided  for. 

Standard  Policy 

In  order  that  this  might  be  so,  a  thorough  study  and 
understanding  of  the  printed  form  of  the  New  York 
Standard  Policy  is  absolutely  necessary. 

252 


Fire  Insurance 

Firstly,  the  interest  of  the  assured  in  the  property  to 
be  covered  should  be  clearly  and  properly  expressed, 
whether  he  be  owner,  lessee  or  mortgagee,  or  if  a  firm,  if 
incorporated  or  not. 

Does  the  property  stand  on  leased  ground  or  does 
the  assured  own  it  in  fee  simple? 

Is  the  property  encumbered  by  chattel  mortgage  or 
not? 

The  occupation  of  the  premises  and  the  uses  they 
are  put  to  should  be  thoroughly  understood  by  the 
broker,  and  privileges  for  such  occupation  or  occupations 
of  a  lesser  hazard  put  in  the  policy. 

Legal  Points 

At  this  point  I  wish  to  call  your  attention  to  the 
fact  that  the  courts  have  ruled  that,  where  the  policy  has 
once  been  voided  by  failure  to  comply  with  its  conditions, 
it  is  not  automatically  brought  to  life  again  by  a  correc- 
tion of  the  faults.  For  instance,  a  building  once  vacant 
for  a  longer  period  than  allowed,  would  not  be  properly 
covered  by  the  existing  policy,  even  if  the  building  be- 
came occupied  at  a  later  date,  unless  the  necessary  per- 
mission be  granted  in  the  first  place. 

The  policy  does  not  cover  loss  to  "awnings,  bullion, 
casts,  curiosities,  drawings,  dies,  implements,  jewels, 
manuscripts,  medals,  pictures,  scientific  apparatus,  sculp- 
ture," and  it  is  necessary  to  enumerate  these  articles  in 
issuing  a  household  furniture  policy  so  that  the  assured 
may  collect  on  these  articles  which  are  usually  part  of 
his  household  effects. 

In  a  manufacturing  plant,  dies,  patterns,  signs  and 
awnings  should  be  similarly  treated. 

253 


Practical  Real  Estate  Methods 

In  insuring  apartment  or  tenement  buildings,  awnings, 
shades  and  stair  and  hall  coverings,  can,  to  a  limited 
extent,  be  covered  at  the  building  rate,  but  care  should 
be  exercised  that  awnings  are  covered  while  in  or  at- 
tached to  building,  so  that  the  period  while  same  may 
be  only  stored  in  the  cellars  or  basement  will  be  pro- 
vided for. 

The  use  of  electricity  for  light,  heat,  and  power  is 
now  prohibited,  except  under  certain  restrictions,  and 
the  conditions  of  these  clauses  should  be  carefully  ob- 
served. 

Structural  Changes 

The  employment  of  mechanics  on  the  premises  for  a 
longer  period  than  15  days  making  extraordinary  altera- 
tions or  repairs,  is  a  violation  of  the  conditions  of  the 
policy,  and  in  the  event  of  this  necessity  arising,  a  privi- 
lege should  be  obtained  from  the  company. 

In  the  event  of  a  loss  occurring,  the  conditions  as 
expressed  in  lines  67  to  80  of  the  Standard  Policy  should 
be  carefully  complied  with,  the  clause  relating  to  the 
care  of  property  after  fire  and  pending  the  adjustment 
of  loss  being  most  important. 

The  change  of  ownership  of  the  insured  property  and 
also  the  change  of  hazard  in  occupation  should  receive 
immediate  attention. 

In  the  cancellation  of  policies,  the  rights  of  assured 
or  mortgagee  should  be  carefully  guarded,  and  in  this 
connection  I  desire  to  call  your  attention  to  the  fact 
that  the  Standard  Mortgagee  Clause  makes  it  incumbent 
upon  the  company  to  continue  the  insurance  in  force  in 
favor  of  the  mortgagee  for  10  days  after  the  completion 
of  a  cancellation  as  regards  the  assured. 

254 


Fire  Insurance 

Cost  of  Insurance 

In  soliciting  insurance,  the  cost  of  same  has,  of  course, 
an  important  bearing,  and  the  argument  is  often  used 
that  the  rate  can  be  reduced  10%  by  the  application  of 
the  100%  Co-insurance  or  Average  Clause.  This,  to 
my  mind,  is  a  most  dangerous  practice,  and  does  not 
redound  to  the  benefit  of  the  assured  in  many  cases.  It 
gives  the  companies  a  decided  advantage,  as  is  best 
proved  by  the  fact  that  they  can  afford  to  reduce  the  rate 
of  insurance  by  reason  of  the  application  of  the  clause. 

An  80%  clause  on  a  $10,000  valuation  requires  an 
$8,000  policy,  and  a  100%  clause  a  $10,000  policy;  con- 
sequently, while  you  reduce  the  rate  10%,  you  increase 
the  insurance  25%,  and  the  net  result  is  that  your  pro- 
tection is  actually  costing  you  i2l/2%  more  than  with 
the  80%  clause.  Of  course,  you  have  additional  pro- 
tection if  you  comply  with  the  conditions  of  the  contract, 
but  at  a  considerable  increase  of  cost  and  in  only  a  few 
cases  is  it  necessary  to  insure  the  full  value  of  property 
because  a  salvage  of  at  least  20%  is  the  rule  and  not 
the  exception  in  cases  of  loss  in  this  city. 

The  hardship  of  a  co-insurance  clause  of  either  kind 
can  be  lessened  in  cases  where  buildings  are  insured,  by 
excluding  the  cost  of  foundations  and  excavations  below 
the  level  of  the  ground,  so  that  these  items  will  not  be 
taken  into  consideration  in  fixing  the  original  value  of  the 
structure,  thus  limiting  the  scope  of  the  clause. 

It  is  also  permissible  to  include  under  the  building  item 
(which  carries  almost  invariably  a  lower  rate  than  the 
contents)  boilers,  engines,  and  main  shafting  and  ma- 
chinery pertaining  to  the  service  of  the  building  or  the 
furnishing  of  power  therein. 

255 


HOW  TO  REDUCE  INSURANCE 
COST 

W.  R.  CRANE 

How  Rates  Are  Fixed  by  the  Companies — Minimum 
Rate  and  Specific  Rate— How  to  Determine—Ele- 
ments that  Add  to  Cost — Importance  of  Schedule 
Computations — Credit  for  Fire  Appliances — Rate  Re- 
duction a  Specialty. 

THERE  are  two  general  classes  of  insurance  rates: 
known  as  minimum  and  specific.  All  dwellings 
containing  not  over  two  families,  and  all  apart- 
ments and  tenement  houses  with  or  without  stores  on 
the  first  floor,  not  over  a  specified  height  and  area,  and 
private  stables  are  given  uniform  rates  applying  alike 
to  all  buildings  of  a  class.  These  are  known  as  "mini- 
mum" rates,  and  all  the  broker  needs  to  know  respect- 
ing them  is  that  the  risk  in  question  is  a  one  or  two 
family  dwelling,  an  apartment  or  tenement  house,  or 
store  and  apartment  or  tenement  house,  and  see  to  it 
that  the  right  rate  for  its  class  has  been  used.  These 
rates  are  published  in  the  handbook  of  the  Exchange, 
which  can  be  purchased  for  a  small  sum,  or  they  can 
be  secured  from  the  company  or  agency  offices.  These 
classes  just  enumerated  include  nearly  all  the  risks  that 
are  rated  under  these  minimum  or  universal  rates. 

How  to  Find  Specific  Rate 

All  buildings  and  their  contents  not  covered  by  these 
minimum  rates  are  given  specific  rates.    That  is,  apart- 

256 


How  to  Reduce  Insurance  Cost 

ment  and  tenement  houses  over  the  specified  size  with  or 
without  stores,  or  of  any  size  if  with  stores  with  a 
hazardous  occupancy,  and  all  mercantile  and  office  build- 
ings, manufacturing  establishments,  docks,  piers,  ware- 
houses, etc.,  have  separate  or  specific  rates  for  each 
individual  building.  A  rate  is  made  for  the  building  and 
for  each  occupant  except  in  the  case  of  dwellings  and 
offices  where  one  rate  is  made  for  such  contents.  If  a 
broker  wishes  to  know  the  rate  on  a  building,  say  900 
Broadway,  all  that  is  necessary  is  to  go  to  a  rate  cabi- 
net. There  is  one  located  in  all  company  and  agency 
offices.  Open  the  drawer  labelled  "Broadway"  and  find 
the  card  numbered  "900."  On  it  will  be  the  rate  for 
the  building  and  each  occupant  therein.  It  may  be  in- 
teresting to  know  that  there  are  about  50,000  such  cards 
covering  individual  buildings.  As  the  whole  problem 
of  rates,  from  the  broker's  point  of  view,  is  occasioned  by 
this  specific  or  individual  rated  class,  we  will  give  the 
minimum  class  no  further  consideration. 


What  Determines  Rate 

And  now  as  to  how  these  specific  rates  are  made.  Be- 
fore a  new  rate  is  published,  an  inspector  from  the 
Exchange  visits  the  property  and  makes  a  careful  in- 
spection of  the  entire  building.  From  his  report  the 
rate  is  computed  on  the  proper  schedule  blank.  There 
are  over  25  forms  of  schedule  in  use  by  the  Exchange, 
each  form  being  used  for  its  respective  class  or  classes. 
It  might  be  well  to  explain  that  these  schedules  are  our 
yardsticks  for  measuring  various  classes  of  properties. 
Our  experience  gives  the  fire  cost  of  a  general  class,  and 
this  for  the  sake  of  illustration  we  will  call  the  length 

257 


Practical  Real  Estate  Methods 

of  our  yardstick.  This  is  divided  into  parts,  each  rep- 
resenting the  different  features  which  contribute  to  the 
fire  loss  of  the  class.  This  yardstick  is  then  used  to 
measure  the  individual  buildings  of  the  class  and  to 
proportion  accurately  the  insurance  premium  to  each. 

In  the  case  of  a  store  and  dwelling  rated  because  of 
a  hazardous  occupant,  the  schedule  is  rather  simple, 
containing  possibly  only  two  or  three  charges.  The 
other  schedules  are  more  complex,  and  to  understand 
fully  the  reason  and  effect  of  the  various  charges  in  the 
schedule  on  a  large  mercantile  or  manufacturing  estab- 
lishment requires  some  little  experience.  The  schedule 
blank  used  to  rate  a  mercantile  building  contains  over  no 
items.  These  items  measure :  ( I )  The  features  of  build- 
ing construction,  such  as  walls,  roofs,  mansards,  floors, 
ceiling  and  side  wall  finish,  area,  height,  elevators,  stair- 
ways, well  holes,  dumb  waiters,  vent  shafts,  skylights, 
cornice,  lighting,  heating,  chimneys,  frame  extensions, 
stone  piers,  iron  columns,  fireproof  floors,  features  of  mill 
construction,  etc.;  (2)  hazards  of  occupancy,  which  in- 
clude the  number  of  tenants  and  number  of  operatives; 
(3)  fire  appliances,  such  as  automatic  alarm,  chemical 
engines,  buckets,  standpipes,  watchman  and  clock,  fire 
escapes;  (4)  exposure  from  surrounding  buildings ;  (5) 
housekeeping  features,  such  as  stove-pipes,  coal  and  gas 
stoves  and  gas  jets  and  any  unsafe  heating  or  lighting 
appliances,  packing  material,  broken  plaster,  benzine, 
lack  of  waste  cans,  untidy  floors,  unsafe  heating  ap- 
paratus, etc. 

You  will  see  from  this  that  in  determining  the  insur- 
ance rate  to  be  charged,  every  effort  is  made  to  give 
consideration  to  the  various  features,  good  or  bad,  which 
affect  the  fire  cost. 

258 


How  to  Reduce  Insurance  Cost 


Value  of  Schedule  Computation 

Thus  far  we  have  considered  the  method  of  fixing 
these  insurance  rates,  and  the  question  naturally  arises, 
what  can  the  broker  do  to  serve  his  client  in  respect  to 
this  matter  of  rates?  As  a  matter  of  fact,  nearly  all 
the  competition  between  brokers  is  over  this  question 
of  rate,  and  efforts  to  secure  the  lowest  figure.  It  should 
be  explained  that  the  Exchange,  upon  the  request  of  an 
assured,  will  furnish  him  with  a  copy  of  the  schedule 
computation  of  his  rate.  This  can  be  turned  over  to 
the  broker  and,  he  having  this  schedule  in  his  posses- 
sion, the  Exchange  will  furnish  him  with  such  infor- 
mation as  he  may  request.  This  is  an  exact  copy  of  the 
schedule  and  shows  all  the  charges  that  comprise  the 
rate.  The  first  thing  to  engage  the  broker's  attention  is 
the  charge,  if  any,  for  poor  housekeeping,  or  faults  of 
management.  A  short  time  ago  I  had  occasion  to  aver- 
age the  rate  on  fifty  buildings  and  found  the  charges 
under  these  housekeeping  items  amounted  to  about  12% 
of  the  gross  rate.  Some  brokers  had  been  asleep.  The 
broker  should  learn  the  reason  for  the  charges  and  just 
what  improvements  are  necessary  to  remove  them. 

Credit  for  Fire  Appliances 

The  next  step  should  be  to  secure  as  large  credit  as 
possible  for  fire  appliances.  Buckets  give  the  largest 
return  for  cost.  If  the  insurance  premium  is  large,  it 
is  frequently  profitable  to  install  automatic  alarm,  stand- 
pipe,  watchman  and  clock,  and  perhaps  sprinklers.  Our 
office  has  just  recommended  improvements  which  will 
cost  not  over  $500,  and  which  will  reduce  the  rate  on 

259 


Practical  Real  Estate  Methods 

a  large  furniture  factory  from  2%  ($20  per  $1,000)  to 
.26   ($2.60  per  thousand). 

If  the  broker  is  enterprising,  he  will  suggest  any 
changes  in  construction  which  will  lower  the  rate,  such 
as  the  correction  of  skylights,  the  protection  of  floor 
openings,  the  fireproofing  of  iron  columns,  cutting  off 
of  boiler  room,  separating  sections  of  a  plant,  providing 
shutters  on  exposed  windows.  If  he  ranks  among  the 
more  progressive,  he  carefully  examines  the  building  and 
all  appliances  and  makes  sure  that  no  charge  has  been 
made  in  error  and  that  credit  has  been  given  for  all 
desirable  features.  The  saving  in  rate  secured  by  a 
careful  scrutiny  is  frequently  considerable.  Not  a  great 
while  ago  we  had  occasion  to  examine  a  schedule  for  a 
broker  and  found  a  change  in  the  process  of  handling 
the  goods  warranted  the  use  of  a  different  schedule  form, 
and  the  rate  was  reduced  without  any  action  on  the  part 
of  the  assured  from  1.55  to  1.07.  Investigation  of  an- 
other rate  showed  that  there  had  been  a  change  in  the 
occupancy  of  an  exposed  building  and  the  rate  was  re- 
duced from  2.31  to  .67. 

Rate  Reduction  a  Specialty 

The  use  of  these  highly  detailed  schedules  has  made 
it  necessary  for  the  large  brokerage  firms  to  employ  men 
skilled  in  the  technique  and  engineering  features  of  this 
business.  Several  companies  have  found  it  desirable  to 
engage  men  of  this  training  to  help  the  brokers  whose 
offices  are  not  so  fortunately  equipped.  In  the  company 
I  represent  there  is  a  department  consisting  of  three 
inspectors  and  a  clerk  who  spend  nearly  their  entire  time 
in  assisting  brokers  in  securing  the  lowest  rate  for  their 

260 


How  to  Reduce  Insurance  Cost 

clients.  I  would  not,  however,  dismay  the  new  broker 
or  experienced  broker  who  is  comparatively  unfamiliar 
with  this  feature  of  the  business,  but  would  suggest: 

First — Always  have  your  assured  secure  a  copy  of  his 
schedule  rate  (provided,  of  course,  there  is  a  specific  rate 
covering  his  property)  and  secure  possession  of  this 
schedule. 

Second — Make  yourself  familiar  with  the  various 
charges  and  suggest  such  improvements  as  you  can. 

Third — Always  suggest  to  your  assured  any  improve- 
ments which  come  within  the  pale  of  reasonableness, 
whether  you  think  he  will  make  them  or  not.  Always 
make  them  in  writing.  Unless  you  do  this,  you  will 
probably  awake  some  day  to  find  that  some  competitor 
has  interested  your  client  in  some  improvement  you 
thought  unworthy  of  consideration,  or  perhaps  casually 
mentioned  in  a  conversation  soon  forgotten. 

Fourth — If  you  can,  verify  all  the  charges  and  make 
sure  you  have  been  given  all  the  credits;  if  you  cannot 
do  this  yourself,  refer  the  schedule  to  some  one  who  can. 
Unless  you  have  made  sure  that  the  rate  is  the  lowest 
that  can  be  secured  and  have  suggested  all  feasible  im- 
provements, you  have  not  done  justice  to  your  client 
and  are  always  subject  to  the  competition  of  some  more 
progressive  and  skilful  broker. 


261 


REAL  ESTATE  INVESTING 

HENRY  MORGENTHAU 

Transient,  Floating  and  Permanent  Populations — 
Growth  in  Twenty-five  Years — Stability  of  Financial 
District— Twenty-hour  Centers—Harlem  as  an  Ex- 
ample—  Tenement  Districts  —  What  the  Future 
Promises 

REAL  estate  in  any  growing  community,  and  par- 
ticularly one  with  limited  space  and  other  ex- 
ceptional advantages,  is  the  surest  and  safest  of 
all  investments,  because,  as  the  population  tributary  to 
it  becomes  greater  and  denser,  values  steadily  rise. 

New  York  City  is  the  greatest  port  of  entry  of  the 
United  States,  is  developing  wonderful  railroad  terminals, 
and  has  one  of  the  longest  canals  in  the  world  terminating 
at  her  door.  Her  theatres,  public  institutions,  art  gal- 
leries, and  many  other  features  which  attract  visitors, 
constantly  add  to  her  success. 

All  these  have  multiplied  so  rapidly  recently  that  even 
the  most  optimistic  have  been  astonished.  We  have  to- 
day such  a  large  floating  population  that  it  would  satisfy 
most  cities  to  possess  it  as  their  permanent  quota,  and 
in  addition  have  more  than  500,000  persons  poured  into 
New  York  daily  via  railroads,  subways,  tunnels,  ferries 
and  bridges,  which  fill  our  offices  and  workshops. 

Progress  in  Twenty-five  Years 

Let  us  look  at  what  it  was  twenty-five  years  ago,  and 
then  compare  it  in  detail  with  to-day.  The  Brooklyn 

262 


Real  Estate  Investing 

Bridge  was  opened  in  May,  1883.  The  highest  buildings 
were  the  present  Postoffice  and  the  old  Tribune  Build- 
ing. The  largest  and  finest  hotel  was  the  Fifth  Avenue. 
The  opera  was  at  the  Academy  of  Music.  The  retail 
business  centered  about  Stewart's,  now  Wanamaker's. 
The  Astor  and  Stewart  mansions  at  Thirty-fourth  Street 
formed  the  residential  centers.  The  elevated  roads,  after 
1 1  o'clock  at  night,  were  running  to  Harlem  on  one  hour 
headway.  The  number  of  elevated  railroad  tickets  sold 
per  day  in  New  York  then  was  230,000;  now  it  is  800,- 
ooo.  The  population  of  Manhattan  was  1,165,000,  and 
of  the  Bronx  51,980.  The  population  of  Manhattan  now 
is  2,500,000,  of  the  Bronx  450,000,  and  of  New  York 
City  4,113,343. 

The  Rev.  Walter  Laidlaw,  the  statistician  of  the 
Research  Department  of  the  New  York  Federation  of 
Churches,  has  calculated  that  in  1921  there  will  be  8,000,- 
ooo  inhabitants  within  a  radius  of  nineteen  miles  of  the 
City  Hall.  In  1890,  44.7  per  cent  of  population  of  the 
States  of  New  York  and  New  Jersey  lived  in  this  dis- 
trict; in  1895,  52  per  cent. 

The  assessed  value  of  Manhattan  Island  in  1883  was 
$1,054,000,000,  and  it  now  is  $4,788,000,000.  The  as- 
sessed value  of  the  First  Ward  was  $64,000,000,  and 
now  it  is  $320,000,000.  R.  T.  Wilson  bought  his  resi- 
dence at  Forty-third  Street  and  Fifth  Avenue  in  1880 
for  $185,000.  Now  it  is  worth  more  than  $1,000,000. 
Lots  in  Broadway  around  Wall  Street  were  worth  about 
$100,000,  and  now  are  worth  $450,000. 

Lots  on  the  south  side  of  Twenty-third  Street,  be- 
tween Fifth  and  Sixth  Avenues,  then  worth  from  $60,- 
ooo  to  $75,000,  are  now  worth  $250,000  to  $300,000. 
Lots  in  the  seventies,  between  Madison  and  Fif*h  Ave- 

263 


Practical  Real  Estate  Methods 

nues,  were  worth  $15,000,  and  now  are  worth  $100,000 
and  upward.  Lots  on  the  West  Side,  in  the  seventies, 
eighties  and  nineties,  were  worth  from  $4,000  to  $10,000,, 
and  are  now  worth  from  $20,000  to  $30,000.  Lots  on 
the  south  side  of  I25th  Street,  Seventh  and  Eighth  Ave- 
nues were  worth  $8,000,  and  are  now  worth  $100,000. 
Most  of  the  well-located  property  has  quadrupled  in 
value. 

The  Mutual,  New  York  Life,  Equitable,  and  Metro- 
politan Life  Insurance  Companies  had  about  $215,000,000 
assets,  and  now  have  $1,572,000,000,  of  which  $345,000,- 
ooo  are  invested  in  mortgages  in  New  York  City. 

The  savings  banks  in  New  York  had  $250,000,000  as- 
sets, and  now  have  $703,000,000,  of  which  $305,000,000 
are  invested  in  mortgages. 

Stability  of  Financial  District 

Now  let  us  see  what  the  shrewd  investor  could  have 
foreseen — I  mean  one  who  did  not  hold  his  hand  too 
close  to  his  face,  but  looked  into  the  future  with  faith  in 
the  country's  growth  and  its  lasting  prosperity.  If  he 
were  engaged  in  business  below  Fulton  Street,  the 
crowded  conditions,  and  ever-increasing  demands  for 
space,  owing  to  the  multiplication  of  banks  and  trust 
companies  and  expansion  of  stock  brokerage  houses,  and 
the  establishment  in  New  York  of  all  the  prominent  rail- 
road companies  and  industrial  combinations,  must  have 
shown  him  the  permanency  of  the  financial  district  and 
its  great  prospective  value. 

The  fact  that  the  same  amount  of  land  would  permit 
of  the  creation  of  three  or  four  times  the  rentable  floor 
space  by  erecting  thereon  an  eighteen  or  twenty- 

264 


Real  Estate  Investing 

four  story  building,  instead  of  the  old  six-story  ones, 
tripled  and  quadrupled  the  value  of  the  land,  especially 
parcels  of  10,000  square  feet  and  over,  which  supplied 
the  growing  demand  for  a  larger  space  on  the  same  floor 
which  could  be  managed  much  more  economically. 

Retailers  were  locating  where  they  could  be  reached, 
not  only  by  their  immediate  neighbors,  but  by  portions 
of  the  'L'  road  in  Sixth  Avenue,  and  by  ferry  passen- 
gers from  Jersey,  etc.,  and  this  is  what  made  Sixth  Ave- 
nue from  Fourteenth  to  Twenty-third  Streets  the  leading 
retail  center.  Large  concerns  advertising  heavily  made 
surrounding  property  valuable.  The  west  side  of  the 
avenues  was  preferred  on  account  of  walking  afternoons 
in  shade,  and  articles  in  windows  not  fading.  For  the 
same  reasons  the  south  side  of  lateral  streets  is  liked. 

A  strange  exception  to  this  rule  was  when  the  Siegel 
Cooper  Company  went  on  the  east  side  of  Sixth  Avenue ; 
there 'being  no  important  department  store  in  the  west 
side  between  Fourteenth  and  Eighteenth  Streets,  nearly 
all  trade  was  transferred  to  the  east  side.  The  very 
daring  and  the  largeness  of  the  enterprise  appealed  to 
the  people. 

A  Twenty-hour  Center 

The  junction  at  Thirty-third  and  Thirty-fourth 
Streets,  Sixth  Avenue  and  Broadway,  used  to  be  called 
the  twenty-hour  corner.  It  was  evident  to  any  one  that 
there  was  a  great  natural  center.  The  Herald  saw  it 
first,  and  was  ridiculed  by  many.  Here  met  the  Thirty- 
fourth  Street  crosstown  cars,  Sixth  Avenue  and  Broad- 
way cars  and  "L"  road.  Now,  every  one  sees  it  since 
the  McAdoo  tunnel  terminates  there,  and  the  Pennsyl- 
vania terminals  are  in  that  section. 

265 


Practical  Real  Estate  Methods 

Every  one  who  had  traveled  abroad  could  realize  that 
we  eventually  had  to  have  a  Rue  de  la  Paix  or  a  Regent 
Street,  and  where  could  it  go  but  to  "Fifth  Avenue," 
north  of  Twenty-sixth  Street,  the  only  street  where  car- 
riages could  be  used  unmolested  by  car  tracks,  and 
where  promenaders  were  always  to  be  found? 

If  Delmonico's  had  not  moved  and  the  Brunswick 
site  had  been  improved  early  with  a  fine  hotel,  it  would 
have  started  at  Twenty-sixth  Street.  Now  it  will  run 
up  to  Central  Park.  When  Altman,  Gorham  and  Tif- 
fany erected  the  finest  business  palaces  in  the  world, 
everybody  saw  it. 

When  the  New  York  Central  and  Pennsylvania  im- 
provements were  projected  and  the  McAdoo  tunnel  ter- 
minal fixed,  it  was  a  logical  conclusion  to  stamp  the 
district  between  Thirty-second  and  Forty-sixth  Streets, 
Madison  Avenue  and  Broadway,  as  the  permanent  heart 
of  New  York,  and  the  caterers  to  our  amusement-mad 
public  have  secured  all  available  sites  for  theatres,  res- 
taurants, etc.,  and  have  created  the  now  famous  'White 
Way/ 

When  the  activity  of  housing  the  people  seeking 
homes  of  their  own  was  at  its  height,  from  1886  to  1896, 
it  was  easy  to  see  that  they  had  to  fill  in  the  space  skirting 
Central  Park,  and  many  a  purchaser  doubled  his  money. 
The  builders  in  1888,  when  they  erected  more  than  three 
hundred  new  private  houses,  made  unusually  large  profits 
by  always  buying  a  block,  or  two  or  three,  north  of  ex- 
isting improvements. 

Harlem  Development 

When  it  came  to  a  section  like  Harlem,  I25th  Street 
very  early  stood  out  as  the  coming  main  street  of  a 

266 


Real  Estate  Investing 

country  town  of  300,000  to  500,000  people,  and  it  re- 
quired no  great  foresight  to  conceive  the  march  of  the 
now  famous  Harlem  with  its  local  pride,  having  social 
clubs,  churches,  places  of  amusements,  etc.  The  more 
fun  that  was  poked  at  these  little  Harlem  flats,  the  more 
popular  they  became.  They  received  lots  of  free  ad- 
vertising in  the  newspapers  and  on  the  stage. 

After  Harlem  was  pretty  densely  populated,  you  had 
to  turn  to  the  Bronx,  and  again  one  could  foresee  that 
the  woodworking  establishments  and  breweries  and  other 
factories  offering  employment  to  thousands,  would  draw 
a  larger  population,  and  that  lots  selling  at  $1,000  apiece 
and  acres  at  $3,000  to  $4,000  had  to  increase  largely  in 
value.  Here  was  a  desirable  neighborhood  selling  below 
its  value.  See  the  result.  Lots  in  Third  Avenue  in  the 
neighborhood  of  I49th  Street,  now  selling  at  $50,000  and 
over,  then  sold  at  $5,000. 

Fortunes  in  Tenement  Districts 

The  incurable  tendency  of  most  nationalities  to  hover 
together  and  create  colonies  and  centers  of  their  own, 
forces  values  in  such  districts  as  they  select  to  abnormal 
prices,  such  as  $25,000  for  Henry,  Delancey  and  Mulberry 
Street  lots.  If  you  follow  the  rise  of  price  of  tenement 
house  lots  in  the  entire  city,  you  will  notice  that  as  the 
number  of  unimproved  lots  are  few,  in  any  neighborhood 
that  can  be  reached  within  thirty  or  forty  minutes  by 
transit,  the  lots  work  up  to  $12,000  and  $15,000,  the 
most  recent  example  being  that  in  1904,  when  the  sub- 
way was  opened. 

The  Donnelly  tract,  from  I34th  to  I37th  Street,  Am- 
sterdam and  Broadway,  was  sold  two  weeks  before  the 
cars  ran  at  $6,000  a  lot,  and  within  three  days  resold  at 

267 


Practical  Real  Estate  Methods 

an  average  of  $9,500.  Now  most  of  the  lots  are  worth 
$12,000  to  $14,000.  At  the  same  time,  lots  from  i4Oth 
to  I46th  Street,  Fifth  to  Seventh  Avenue,  were  selling 
at  $5,000,  and  now  they  are  worth  $12,000.  The  rents 
that  can  be  obtained  justify  a  price  of  $15,000  per  lot, 
but  not  more. 

As  to  apartment  houses  of  higher  grade,  always  give 
the  broad  avenues,  especially  such  as  have  views  over- 
looking parks  or  rivers,  the  preference.  Any  apartment 
house  that  has  exceptional  light  and  outlook  is  bound  to 
pay  well.  The  tendency  is  entirely  in  that  direction. 
There  is  one  Central  Park  apartment  house  where  forty- 
three  families  out  of  forty-six  are  living  on  their  in- 
comes. 

Looking  Into  the  Future 

What  see  we  for  the  future? 

Fifty-seventh  Street,  the  great  retail  street,  the  nat- 
ural avenue  for  the  distribution  of  Queensboro  Bridge 
traffic. 

The  great  hotel  center  in  New  York  facing  Central 
Park. 

Fifth  Avenue  above  Fifty-ninth  Street  turned  into 
high-class  apartment  hotels  and  family  hotels  like  those  in 
Paris,  where  strangers  spend  their  winter  months. 

The  amusement  center  moved  up  to  and  around  the 
Central  Park  Theatre,  etc.,  and  from  that  running  up 
to  the  Seventy-second  Street  express  station  of  the  sub- 
way. 

Hudson  River  Bridge  landing  people  between  Forty- 
ninth  Street  and  Fifty-first  Street,  and  another  up 
around  i67th  Street,  having  the  Palisades  as  one  of  the 
piers. 

?68 


Real  Estate  Investing 

Sixth  Avenue,  between  Twenty-third  and  Thirty-sec- 
ond Streets,  changed  into  a  good  retail  and  amusement 
center.  It  is  a  natural  link  that  has  been  neglected. 

The  water  fronts  on  both  the  east  and  west  sides 
improved,  as  permanent  sites  with  uninterrupted  light 
can  be  secured,  prices  being  abnormally  low. 

One  Hundred  and  Twenty-fifth  Street  duplicated  by 
I45th  Street,  between  Sixth  and  Eighth  Avenues,  which 
is  also  a  great  connecting  link  between  Washington 
Heights  and  the  Bronx.  Small  stores  in  adjacent  ave- 
nues are  forerunners  of  this  trend  of  development. 

Get  close  to  permanent  centers,  such  as  financial,  re- 
tail, amusement  and  local,  like  I25th  Street,  I49th  Street 
and  Third  Avenue,  and  all  great  junctions.  Prefer  cor- 
ners on  account  of  light  and  rents.  In  retail  sections 
give  the  south  side  and  west  side  preference  over  the 
north  and  east  sides. 

Remember,  that  the  land  alone  increases  in  value,  and 
not  bricks  and  mortar. 

Watch  developments  and  give  the  section  where  popu- 
lation is  densest  the  most  attention.  Above  all,  give 
transit  facilities  great  weight.  We  are  all  lazy  and  in 
a  hurry.  Remember,  that  the  store  floors  of  buildings 
in  retail  neighborhoods  produce  70  per  cent  of  rent,  as 
against  30  per  cent  for  the  upper  three  or  four  floors. 

Real  estate  cannot  be  handled  like  railroad  securities. 
Frightened  stockholders  fix  their  prices,  while  if  one  or 
two  houses  are  sacrificed,  it  is  forgotten. 


269 


REAL  ESTATE  CORPORATIONS 

ROBERT  E.  DOWLING 

Titles  Held  by  Corporations  as  Compared  with  Part- 
nership Holdings — Lessons  of  the  Panic — Real  Es- 
tate versus  Listed  Stocks — Stability  of  Manhattan 

Values. 

i 

A  LARGE  part  of  the  real  estate  development  in  New 
York  City  is  now  being  done  by  real  estate  cor- 
porations. Within  the  past  twenty  years,  the  in- 
crease in  the  number  and  capital  of  these  companies  has 
been  very  great,  as  the  advantages  of  corporate  owner- 
ship and  management  of  real  property  have  become  more 
fully  understood.  One  of  the  main  advantages  of  such 
companies  which  first  occurred  to  me  in  operating  in 
real  estate,  about  twenty  years  ago,  was  the  question  of 
title.  The  advantages  of  holding  title  in  a  corporation, 
which  would  not  be  affected  by  death,  illness,  disability 
or  absence  of  individuals,  as  in  the  case  of  a  partner- 
ship, nor  by  the  legal  difficulties  which  any  of  those 
associated  might  get  into  in  transactions  not  connected 
with  this  ownership,  made  it  imperative  to  put  titles 
in  corporations,  so  that  all  interests  should  be  protected. 
As  transactions  grew  larger,  the  difficulty  of  financing 
by  individuals  or  small  groups  of  associates  grew  also 
and  became  a  factor. 

A  number  of  real  estate  corporations  were  incorporated 
about  ten  years  ago  with  large  capital.  These  companies 
have  since  successfully  carried  through  some  of  the  largest 

270 


Real  Estate  Corporations 

building  and  real  estate  operations  in  the  city.  I  was  one  of 
the  organizers  of  the  first  company,  so  far  as  I  know, 
that  used  the  word  "realty"  in  its  title,  namely,  New 
York  Realty  Company.  Since  that  time,  there  have  been 
thousands  of  companies  organized  throughout  the  coun- 
try, generally  known  as  realty  companies.  Many  of 
these  companies,  operating  outside  of  Manhattan  Island, 
are  of  an  entirely  different  class  from  those  which  con- 
fine their  operations  to  New  York  property. 


Lessons  of  the  Panic 

The  panic  through  which  we  have  recently  passed, 
which  was  one  of  the  most  trying  in  the  history  of  this 
country,  I  think,  affected  real  estate  values  less  than 
we  thought  possible.  Of  the  hundreds  of  real  estate 
companies  in  the  City  of  New  York,  operating  in  all 
classes  of  property — from  those  operating  in  vacant  lots 
on  the  northerly  undeveloped  part  of  the  island  to  the 
larger  companies  engaged  in  the  business  of  improving 
and  operating  some  of  the  most  valuable  parcels  of  real 
estate  in  the  lower  part  of  the  city — I  can  recall  only 
one  fair-sized  corporation  which  failed,  and  that  was 
in  the  nature  of  a  private  building  company.  No  other 
business  in  New  York,  I  believe,  stood  up  under  the 
trying  conditions  of  1907  and  1908  with  better  success 
than  real  estate  and  building  companies.  Yet  for  nearly 
a  year  before  the  panic  the  largest  lenders  on  real  estate 
mortgages  were  practically  out  of  the  market.  And, 
moreover,  during  that  year  the  builders  of  large  apart- 
ment houses,  lofts  and  mercantile  buildings  and  office 
buildings  were  able  to  borrow  money  on  mortgage  from 
practically  but  one  source,  the  Metropolitan  Life  In- 

271 


Practical  Real  Estate  Methods 

surance  Company,  which  seemed  to  be  the  only  life 
insurance  company  with  funds  for  real  estate  loans.  The 
other  large  companies  put  their  funds  mainly  in  railroad 
bonds  in  which  they  had  already  a  large  interest. 


Real  Estate  versus  Listed  Stocks 

Real  estate  corporations,  thus  far,  have  appealed  for 
their  capital  to  a  small  section  of  the  public.  The  stock 
of  these  companies,  in  general,  is  owned  by  persons 
personally  acquainted  with  the  officers  and  directors. 
Except  in  one  company,  the  stock  of  which  is  listed 
on  the  Stock  Exchange,  the  stock  ownership  is  not  widely 
distributed.  I  believe  that  the  general  public  will  become 
more  and  more  interested  in  investing  in  stocks  of  real 
estate  companies,  but  I  think  it  will  be  difficult  to  get 
much  public  support  for  the  stocks  of  small  companies. 
That  portion  of  the  public  which  invests  in  railroad 
stocks,  industrial  stocks,  bank,  insurance  and  trust  com- 
pany stocks,  prefers  a  stock  which  is  more  readily  sold 
than  that  of  the  average  real  estate  company.  They 
will  be  content  with  smaller  dividend  rates  and  profit 
if  they  can  be  sure  of  the  greater  marketability  of  their 
holdings  when  needed.  One  of  the  reasons  given  by 
most  investors  for  preferring  listed  securities  is  their 
ready  convertibility  into  cash.  If  the  investors  would 
carefully  consider  this  question,  they  would  find,  I  think, 
that  stock  is  readily  converted  into  cash  when  not  offered 
in  large  quantities,  but  that  when  any  great  percentage 
of  the  capital  stock  of  any  listed  company  is  offered 
within  a  short  time  its  price  falls  very  rapidly.  Real 
estate  on  Manhattan  Island  can  be  sold  for  cash,  as 
well  as  stock  on  the  Stock  Exchange,  if  the  owners 

272 


Real  Estate  Corporations 

of  real  estate  are  willing  to  sell  at  the  relative  per- 
centage of  loss  that  they  would  take  in  selling  listed 
stock.  Many  a  purchaser  of  1,000  shares  of  stock  at 
par  in  good  times  is  glad  to  get  $60  per  share  in  a 
period  when  money  is  in  great  demand.  It  would  be 
very  difficult  to  find  a  buyer  of  any  piece  of  New  York 
City  property  who  had  bought  at  $100,000  cash  in 
good  times,  who  would  accept  a  price  of  $60,000  for  it 
even  when  money  is  scarce. 

Stability  of  Manhattan  Values 

No  property  in  the  world  is  held  in  stronger  hands 
than  the  real  estate  on  Manhattan  Island.  For  the 
investor,  there  is  about  as  small  a  probability  of  loss 
as  there  can  be  in  any  investment.  There  has  been 
a  steady  advance  of  real  estate  on  Manhattan  Island 
for  the  past  twenty-three  years.  I  have  seen  all  sorts 
of  poor  sections  develop  into  valuable  ones.  Few  dis- 
tricts fail  to  show  a  value  greater  now  than  it  was 
twenty  years  ago.  Holders  of  real  estate  are  most 
tenacious.  Where  there  are  a  thousand  people  who 
will  sacrifice  stock  exchange  securities  at  panic  prices, 
you  might  find  one  who  will  sacrifice  real  estate  in  any 
section  at  any  time. 

That  is  one  of  the  disadvantages  thus  far  of  real 
estate  companies  in  the  introduction  of  the  stock  feature. 
While  it  does  not  affect  the  value  of  the  holdings  of 
the  company,  it  does  affect  the  holdings  of  the  individual 
stockholders.  If  a  man  owns  a  house  in  a  certain  block, 
worth  $40,000,  and  some  one  else  in  the  same  block 
sells  the  same  kind  of  a  house  for  $35,000,  it  seldom 
affects  the  other  holders.  But  if  a  man  holding  stock 

273 


Practical  Real  Estate  Methods 

in  a  railroad  company  for  which  he  has  paid  par  learns 
that  one-hundreth  part  of  its  capital  is  sold  at  75,  he  be- 
comes infected  with  the  idea  that  his  holdings  may  not 
be  worth  more  than  75.  He  does  not  look  at  the  assets 
alone,  but  gets  the  Stock  Exchange  views  of  market- 
ability. 

Advantages  of  Realty  Companies'  Shares 

An  investor  who  believes  in  real  estate  holdings  in 
New  York,  and  who  wishes  to  share  the  benefits  of  the 
growth  in  values,  has,  on  the  other  hand,  a  greater 
opportunity  to  do  so  by  purchasing  stock  in  a  well- 
known  and  strongly  capitalized  real  estate  company  than 
he  would  have  by  individual  purchases  of  real  estate. 
He  has  the  benefit  of  the  judgment  of  people  especially 
qualified  to  know  values  and  foresee  advances  in  certain 
sections.  He  also  has  the  advantage  of  being  backed 
by  a  large  number  of  stockholders,  who  can  always  be 
called  upon  to  furnish  additional  capital,  if  necessary, 
and,  in  general,  has  all  the  benefits  of  the  cooperation 
of  many  such  people. 

Real  estate  in  New  York  is  not  a  gold  mine,  nor  can 
any  one  expect  to  get  the  return  on  his  investment  that 
he  might  in  a  successful  mine.  Those  who  are  looking 
for  investments  which  will  give  them  back  20,  40  or 
60  per  cent  per  annum  on  their  money  would  better 
not  invest  in  any  real  estate  company,  no  matter  how 
bright  the  prospects  are,  because  operations  of  this  sort, 
while  possible,  are  not  likely  to  be  frequent.  The  future, 
I  believe,  will  bring  forth  very  much  larger  corpora- 
tions than  we  have  had  up  to  this  time.  They  will  be 
investing  more  than  speculative  companies.  For  it  is 
well  established  now  that  no  few  men  in  any  large 

274 


Real  Estate  Corporation 

company  can  well  compete  with  individual  operators  in 
buying  and  selling  ordinary  pieces  of  property.  The 
principal  reason  is  that  the  time  required  to  examine 
each  piece  and  decide  upon  the  chances  of  a  quick  re- 
sale at  a  good  profit  prevents  the  few  officers  who  would 
be  able  to  have  that  special  knowledge  from  inspecting 
enough  pieces  to  keep  up  the  average  on  the  capital  as 
compared  with  the  smaller  operator. 


275 


CONTRACTS  FOR  THE  SALE  OF 
REAL  ESTATE 

HENRY  F.  MILLER 

Contract  and  Deed — Formality  Desirable — Impor- 
tance of  Accurate  Description — The  Seller's  Deed  as 
a  Guide — Tenement  House  Requirements — Terms  of 
Payment — Time  as  Essence — Surveys 

THE  most  important  paper  in  a  transaction  relating 
to  the  sale  of  real  estate,  is  the  contract  specifying 
the  agreement  of  the  parties,  and  setting  forth  the 
terms  of  the  sale.     While,  of  course,  the  deed  which  is 
delivered,  consummates  the  sale,  nevertheless,  the  rights 
of  the  parties  are  practically  fixed  and  determined  by  the 
contract  which  they  have  previously  entered  into,  and 
for  that  reason,  the  deed,  although  it  is  the  formal  and 
final  instrument,  which  transfers  the  title,  really  follows 
and  is  controlled  by  the  contract  of  sale. 

Sometimes,  where  there  are  no  complications,  and  no 
special  clauses  to  be  drawn,  the  drawing  of  a  contract  is 
a  very  simple  matter,  and,  under  such  circumstances, 
real  estate  agents  and  brokers  who  have  gained  famil- 
iarity with  the  requirements  of  such  a  contract,  are  able 
to  draw  them  successfully.  Loosely  drawn  contracts, 
however,  often  lead  to  litigation  or  loss,  and  in  view  of 
the  importance  of  accurately  defining  all  the  essential 
particulars,  it  is  prudent  that  the  preparation  of  such 
papers  should  be  left  to  lawyers. 

276 


Contracts  for  the  Sale  of  Real  Estate 

Contracts  for  the  sale  of  real  estate  are  required,  by 
statute,  to  be  in  writing,  and  to  be  signed  by  the  vendor, 
or  the  lawfully  authorized  agent  of  the  vendor;  other- 
wise they  are  void,  even  though  a  part  payment  be  made 
on  account.  No  special  form  of  contract  is  prescribed 
by  law,  but  it  is  essential  that  the  writing  must  embody 
the  agreement  of  the  parties. 

The  contract  may  consist  of  several  letters,  or  writ- 
ings. No  seal  is  necessary.  It  is  not  necessary  that 
the  contract  should  be  acknowledged,  and,  from  the 
standpoint  of  the  vendor,  it  is  better  that  it  should  not 
be  acknowledged,  since,  without  an  acknowledgment,  or 
proof,  it  cannot  be  recorded.  A  recorded  contract,  when 
it  is  not  fulfilled,  is  liable  to  embarrass  the  vendor. 

Formal  Contract  Desirable 

It  is  desirable,  in  drawing  such  contracts,  to  adopt  the 
usual  printed  forms,  for,  while,  as  already  stated,  the 
law  does  not  prescribe  any  particular  form,  it  is  best,  in 
entering  upon  any  transaction  of  this  character,  to  avoid 
the  unnecessary  questions  and  difficulties,  which  would 
be  apt  to  arise  if  the  contract  were  informal,  or  con- 
sisted of  various  papers. 

The  rules  applicable  to  contracts  in  general  apply,  of 
course,  to  contracts  for  the  sale  of  real  estate.  The  par- 
ties must  be  of  full  age  and  under  no  disability,  and 
if  the  vendor  is  represented  by  an  attorney  in  fact,  the 
power  of  attorney  must  be  sufficiently  full  to  confer  the 
power  to  execute  the  contract,  and  there  should  be  some 
satisfactory  assurance  that  the  absent  principal  is  alive, 
since  a  power  of  attorney,  not  coupled  with  an  interest, 
is  revoked  by  the  principal's  death. 

277 


Practical  Real  Estate  Methods 

The  purchaser  is  usually  required  to  make  a  payment 
on  account  of  the  purchase  price.  He  should  be  satis- 
fied that  the  person,  with  whom  he  is  dealing,  is  the 
owner  of  the  property,  or  duly  authorized  by  the  owner 
to  sell  it,  and  of  sufficient  responsibility  to  answer  for 
the  return  of  the  deposit,  in  case  the  contract  be  not 
performed  on  the  seller's  part. 

Importance  of  Accurate  Description 

The  property  sold  should  be  accurately  and  precisely 
described.  The  mere  mention  of  the  street  number  may 
lead  to  difficulty,  as  there  is  here  no  representation  of 
the  dimensions  or  area  of  the  property,  and  the  purchaser 
might  find  himself  compelled  to  accept  a  piece  of  land 
smaller  than  he  had  supposed.  If  the  premises  are  fully 
described  in  the  contract,  and  a  material  deficiency  is 
afterwards  disclosed,  the  purchaser  is  entitled  to  be  re- 
lieved of  his  purchase.  Generally  speaking,  a  deficiency 
would  be  material,  when  of  such  a  character  that,  had 
it  been  known,  it  would  have  prevented  the  execution  of 
the  contract.  The  words  "more  or  less"  give  a  flexi- 
bility to  the  description,  when  the  contract  deals  with 
country  property,  but  do  not  have  any  great  effect  in 
relation  to  city  property.  Where  the  premises  are  de- 
scribed by  metes  and  bounds,  it  is  sometimes  advanta- 
geous and  helpful  to  mention  the  street  number.  If 
there  be  a  discrepancy  between  the  street  number  and 
the  description  by  metes  and  bounds,  the  latter,  generally 
speaking,  would  control. 

Personal  property  affixed  to  the  land,  which  is  intended 
to  be  included  in  the  sale,  should  be  specified,  as  for 
example,  gas  fixtures ;  if  not  specified  in  the  contract,  the 


Contracts  for  the  Sale  of  Real  Estate 

purchaser  would  not,  as  a  matter  of  law,  be  entitled 
to  receive  such  fixtures. 

Ordinarily  speaking,  the  description  to  be  inserted  in 
the  contract  should  be  taken  from  the  deed,  which  con- 
veyed the  property  to  the  seller.  If  the  seller  has  had 
his  title  insured,  the  description  contained  in  the  title 
policy,  would  be  his  safest  guide.  Any  matters,  which, 
if  omitted,  would  give  the  purchaser  ground  for  object- 
ing to  the  title,  should  be  specified  in  the  contract.  Thus, 
if  there  are  any  covenants  restricting  the  use  of  the 
property,  or,  generally  speaking,  any  agreement  of  any 
kind  which  affects  the  property,  as  for  example,  party 
wall  agreements,  reference  should  be  made  thereto.  All 
incumbrances  should  be  mentioned,  including  leases  and 
mortgages.  If  there  be  any  easements  over  the  land, 
these  should  also  be  specified.  From  the  standpoint  of 
the  purchaser,  if  a  covenant  of  restriction  is  referred  to 
as  being  set  forth  in  a  recorded  paper,  referred  to  by 
its  liber  and  page,  it  would  be  advisable  to  have  a  copy 
of  the  covenant  added  to  the  contract,  or  else  sufficient 
time  should  be  afforded  to  the  purchaser,  or  his  attor- 
ney, to  examine  the  recorded  paper  before  the  contract 
is  executed.  Notice  of  any  writing  is  notice  of  its  con- 
tents, and  it  is  dangerous  to  accept  a  contract  made  sub- 
ject to  a  recorded  paper,  where  reliance  is  had  merely 
upon  oral  explanation  of  the  contents  of  such  paper. 

Tenement  House  Requirements 

It  is  usual  in  contracts  relating  to  tenement  houses,  to 
insert  a  clause  relating  to  compliance  with  tenement 
house  law  requirements,  and  the  fairest  clause  is  one 
which  calls  upon  the  seller  to  comply  with  all  departmen*- 

279 


Practical  Real  Estate  Methods 

notices  issued  up  to  the  time  of  the  execution  of  the 
contract,  and  calls  upon  the  purchaser  to  sustain  the 
burden  of  complying  with  any  thereafter  issued.  If  the 
seller  agrees  to  comply,  at  the  time  of  closing  with  all 
notices  or  requirements  of  a  municipal  department,  he 
puts  himself  in  the  power  of  the  purchaser,  who  may 
procure  action  by  a  department  requiring  work  to  be 
done,  after  the  signing  of  the  contract,  which  may  im- 
pose considerable  hardship  upon  the  seller. 

It  is,  of  course,  unnecessary  to  specify  in  the  contract 
any  incumbrances  which  it  is  the  intention  of  the  seller 
to  dispose  of  prior  to  the  time  of  closing,  but  if  it  is 
the  intention  of  the  seller  to  dispose  of  such  incum- 
brances, as  for  example,  taxes,  judgments  or  mortgages, 
at  the  time  of  closing  title,  it  is  well  to  make  a  reference 
to  such  incumbrances  in  the  contract,  and  to  state  that 
they  are  to  be  disposed  of  at  the  time  of  closing  title, 
out  of  the  consideration  money  to  be  then  paid.  This 
makes  the  satisfaction  of  the  encumbrance  a  simultaneous 
transaction  with  the  payment  of  the  consideration,  and 
may  save  the  seller  from  being  in  default  in  his  perfor- 
mance of  the  contract. 


Terms  of  Payment 

The  terms  of  payment  of  the  consideration  should  be 
clearly  set  forth  in  the  contract.  If  there  be  a  mortgage 
outstanding,  subject  to  which  the  property  is  to  be  sold, 
the  amount  of  this  mortgage  forms  part  of  the  consid- 
eration. If  the  mortgage  had  previously  been  executed 
by  the  seller,  so  that  the  seller,  at  the  time  of  closing 
the  contract  is  personally  liable,  he  may  desire  to  relieve 
himself,  to  some  extent,  of  this  liability,  and  can  do  so 

280 


Contracts  for  the  Sale  of  Real  Estate 

by  inserting  a  clause  in  the  contract,  that  the  purchaser, 
taking  subject  to  such  mortgage,  will  assume,  and  agree 
to  pay  it.  If  the  seller  is  not  liable  personally  on  the 
bond  and  mortgage,  he  may  contract  to  sell  merely  sub- 
ject thereto,  without  imposing  on  the  purchaser  the 
obligation  to  pay  the  same.  If  a  portion  of  the  consid- 
eration is  to  be  paid  by  the  execution,  on  the  part  of  the 
purchaser  of  a  bond  and  mortgage,  the  provisions  to 
be  inserted  in  the  bond  and  mortgage  should  be  carefully 
stated,  and  it  would  also  be  proper  to  specify  that  the 
purchaser  should  pay  the  mortgage  tax  to  be  imposed 
thereon,  and  the  fees  for  drawing  the  papers,  and  re- 
cording the  mortgage.  If  it  is  desired  that  the  purchaser 
should  personally  execute  such  bond  and  mortgage,  in 
contrast  with  some  one  to  whom  the  contract  may  be 
assigned,  and  who  may  not  be  as  financially  competent,  a 
proper  clause  should  be  inserted  in  the  contract  to  safe- 
guard it.  The  balance  of  the  consideration  is  usually 
paid  in  cash  at  the  time  and  place  specified  for  the  de- 
livery of  the  deed.  Some  purchasers,  in  order  to  avoid 
the  inconvenience  incident  to  making  a  legal  tender  in 
cash,  specify  that  the  final,  or  balance  payment,  may  be 
made  in  cash,  or  by  a  certified  check.  It  would  be  proper 
precaution  for  the.  seller,  in  such  a  case,  to  specify  that 
the  check  should  be  drawn  upon  a  solvent  bank. 

Delivery  of  Deed 

The  contract  should  also  specify  the  time  and  place 
for  the  delivery  of  the  deed,  and  the  character  of  the 
deed  to  be  executed.  The  printed  form,  sold  by  law 
stationers,  usually  calls  for  a  warranty  deed,  with  the 
usual  full  covenants.  A  warranty  deed  practically  makes 

281 


Practical  Real  Estate  Methods 

the  grantor  the  insurer  of  the  title,  up  to  the  amount  of 
the  consideration,  which  he  has  actually  received,  and  in 
these  days,  when  title  insurance  usually  accompanies 
each  purchase,  an  opportunity  is  sometimes  afforded  to 
the  seller  to  suggest  that  the  purchaser  should  be  willing 
to  accept  a  deed  without  covenant  of  warranty. 

Time  as  Essence 

The  time  when  the  contract  is  to  be  closed  is  a  matter 
of  importance.  In  actions  at  law,  time  is  usually  con- 
sidered to  be  of  the  essence  of  a  contract,  but  in  actions 
in  equity,  a  contrary  rule  prevails.  Where  it  is  the  de- 
sire of  the  parties,  that  time  should  be  of  the  essence  of 
the  contract,  it  is  preferable  to  specify  this  in  the  con- 
tract. 

The  contract  of  sale  usually  provides  for  the  appor- 
tionment and  adjustment  of  rents,  insurance  and  inter- 
est at  the  time  of  the  delivery  of  the  deed. 

A  few  general  observations  may  be  added  in  closing. 
The  seller  should  specify  in  the  contract  anything, 
which,  if  omitted,  would  give  the  purchaser  a  right  to 
reject  the  title.  The  seller  should  see  that  the  person 
called  upon  to  assume  liability,  is  a  person  of  responsi- 
bility, as  for  example,  where  the  purchaser  is  to  assume 
a  mortgage,  which  had  been  executed  by  the  seller,  or 
to  assume  the  liability  of  the  seller  under  any  outstand- 
ing agreement. 

Surveys 

Of  late  years,  the  matter  of  surveys  has  become  very 
serious.  It  now  rarely  happens  that  a  survey  discloses 
a  piece  of  property  as  standing  precisely  on  the  lines  of 
record  title.  It  is  a  proper  precaution  for  the  seller 

282 


Contracts  for  the  Sale  of  Real  Estate 

to  have  a  survey  made  of  his  property,  and  to  sell  it 
subject  to  the  conditions  which  are  thereon  shown.  If 
the  survey  be  thus  referred  to,  the  purchaser  will  not 
be  entitled  to  object  to  the  title  for  anything  disclosed 
thereon. 

Liability 

It  sometimes  happens  that  a  seller,  acting  with  the 
utmost  good  faith,  is  unable  to  comply  with  his  contract, 
and  under  such  circumstances,  he  becomes  liable  to  the 
purchaser  for  the  return  of  the  deposit,  and  for  the 
reasonable  expenses  of  the  examination  of  the  title.  The 
amount  of  these  reasonable  expenses  is  an  uncertain 
quantity,  and  it  is  prudent  for  the  seller  to  specify,  in 
the  contract,  the  amount  he  should  be  called  upon  to 
pay,  in  addition  to  the  return  of  the  deposit  money,  in 
case  the  title  be  rejected  for  a  valid  reason. 

Possession  and  Improvement 

If  a  purchaser,  under  a  contract,  enter  into  the  pos- 
session of  the  property,  prior  to  the  time  of  the  delivery 
of  the  deed,  he  is  not  a  tenant.  He  cannot  be  sued  for 
rent,  nor  dispossessed  by  summary  proceedings.  Except 
under  special  circumstances,  it  is  best  for  the  seller  not 
to  deliver  possession  until  the  time  the  deed  is  delivered. 
On  the  other  hand,  if  the  buyer  enters  into  possession, 
he  cannot  dispute  the  seller's  title,  and  his  retention  of 
possession  operates  as  a  waiver  of  objections  or  defects. 

If  the  buyer  make  improvements  on  the  property  be- 
fore he  receives  .his  deed,  he  cannot,  in  the  absence  of 
an  agreement,  recover  for  the  value  of  the  Improvements 
against  the  seller  who  has  acted  in  good  faith,  if  the 
title  fail. 

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Practical  Real  Estate  Methods 

Generally  speaking,  the  acceptance  of  a  deed  is  pre- 
sumptive evidence  of  the  execution  of  the  contract,  and 
the  rights  and  remedies  of  the  parties  are  thereafter 
determined  by  the  deed,  and  the  original  contract  is  no 
longer  of  effect.  But  the  form  and  contents  of  the  deed, 
as  already  shown,  are  governed  by  the  provisions  of  the 
contract  of  sale,  and  the  deed,  while  the  consummation 
of  the  transaction,  is,  in  reality,  merely  the  performance 
and  result  of  the  contract. 


284 


NOTES  AND  COMMENTS  ON  THE 
LAW  OF  LANDLORD  AND 

TENANT 

HENRY  F.  MILLER 

Definition  of  Tenancy  —  Servants  —  The  Janitor's 
Rights — Assignment  of  Leases — Who  Owns  Im- 
provements— Liability  for  Accident — Eviction — Con- 
demnation Clauses 

THE  relation  of  landlord  and  tenant  may  arise  be- 
tween parties  by  a  written  agreement  or  by  an 
oral  agreement,  but  a  lease  for  more  than  one 
year  is  required  by  statute  to  be  in  writing,  subscribed 
by  the  lessor  or  landlord. 

A  tenancy  may  be  either  for  years,  from  year  to  year, 
monthly,  or  at  will  or  sufferance.  An  estate  for  years 
is  created  by  writing  and  arises  in  all  cases  where  formal 
leases  are  entered  into.  Estates  from  year  to  year  may 
arise  by  operation  of  law,  as  where  a  tenant  for  years 
holds  over  at  the  end  of  a  year,  or  where  a  tenant  enters 
into  the  possession  of  the  property  for  a  term  under  a 
parol  lease  which  is  void  under  the  Statute  of  Frauds. 
An  estate  at  will  is  one  which  is  terminable  by  either 
party,  and  an  estate  at  sufferance  arises  where  a  tenant 
holds  over  and  the  holding  over  has  not  existed  long 
enough  to  make  a  continuance  under  the  preceding  lease. 

Tenant  or  Servant 

Where  a  tenant  enters  into  the  possession  or  occupa- 
tion of  property  in  connection  with  his  employment,  the 

285 


Practical  Real  Estate  Methods 

occupation  is  usually  that  of  a  servant,  and  riot  tenant. 
The  word  "servant"  is  here  used,  not  in  the  ordinary 
acceptance  of  the  term,  as  referring  to  a  menial,  but  in 
connection  with  its  meaning  in  law  as  a  person  who  is 
employed.  Cases  of  employment  are  usually  discussed 
in  legal  text-books  under  the  head  of  "Master  and  Ser- 
vant." Illustrations  of  occupation  of  premises  in  con- 
nection with  service  are  found  in  the  employment  of 
coachmen,  gardeners  and  farm  laborers,  and  the  matter 
sometimes  assumes  importance  in  the  city  from  the  em- 
ployment of  janitors.  Where  a  janitor  is  employed  and 
paid  partly  in  money  and  partly  in  the  privilege  afforded 
to  him  of  occupying  a  portion  of  the  premises,  his  occu- 
pation is  that  of  a  servant,  not  of  a  tenant.  Under  such 
circumstances,  the  employer  has  the  right,  upon  dis- 
charging the  janitor,  to  remove  his  furniture  and  goods 
from  the  premises  and  to  employ  the  necessary  force  to 
accomplish  this  purpose.  Delay  in  the  removal  of  the 
janitor  might  turn  his  occupation  into  a  tenancy  by  suf- 
ferance. A  janitor,  however,  may  be  a  tenant.  This 
would  arise  in  cases  where  he  rented  an  apartment  and 
paid  the  rent  partly  in  cash  and  partly  by  services  to  be 
rendered.  Under  such  circumstances  the  janitor  could 
not  be  removed  without  resort  to  the  usual  dispossess 
proceedings. 

Assignments  and  Sub-leases 

When  a  tenant  or  lessee  disposes  of  his  entire  interest 
under  a  lease,  it  is  called  an  assignment.  When  a  tenant 
leases  the  whole  or  any  part  of  the  premises  for  a  shorter 
period  than  the  term  of  his  own  lease,  it  is  called  a 
sub-lease.  Although  a  tenant,  by  the  lease  under  which 

286 


Law  of  Landlord  and  Tenant 

he  holds,  might  be  prohibited  from  making  an  assign- 
ment, he  would,  nevertheless,  have  the  right  to  make  a 
sub-lease.  The  distinction  between  an  assignment  and 
a  sub-lease  is  that  in  an  assignment  we  find  a  transfer 
of  the  tenant's  whole  interest,  and  that  in  a  sub-lease  the 
tenant  has  reserved  for  himself  a  reversion.  When  a 
lessee  assigns  his  entire  interest,  his  assignee,  as  long 
as  he  is  in  possession  of  the  property,  is  liable  under  the 
lease.  He  is  said  to  be  in  privity  of  estate  with  the 
landlord.  The  original  lessee  also  remains  liable  be- 
cause of  the  agreements  contained  on  his  part  in  the 
original  lease.  The  original  lessee  is  said  to  be  liable 
because  of  privity  of  contract.  Thus,  in  cases  of  assign- 
ment two  persons  are  liable  to  the  landlord — the  original 
lessee  by  privity  of  contract,  and  the  assignee  by  privity 
of  estate. 

Improvements  by  Tenant 

Where  a  tenant  adds  fixtures  to  the  premises  which 
are  removable,  they  must  be  removed  by  him  at  or  be- 
fore the  expiration  of  his  tenancy;  otherwise  the  tenant 
is  assumed  to  have  waived  his  right  to  remove  them. 
If  the  tenant  has  made  improvements  which  he  is  en- 
titled to  remove,  and  thereafter,  upon  the  expiration  of 
his  tenancy,  he  enters  into  a  new  lease  with  the  land- 
lord without  reserving  the  right  to  remove  the  improve- 
ments, he  is  assumed  t6  have  waived  his  right  and  can- 
not thereafter  enforce  it. 

Repairs 

As  to  repairs,  the  rule  is  that,  in  the  absence  of  an 
express  agreement,  the  landlord  is  not  bound  to  make 

287 


Practical  Real  Estate  Methods 

repairs.  This,  however,  relates  to  premises  in  the 
occupation  of  the  tenant.  In  an  apartment  house  it 
would  relate  to  the  tenant's  apartment,  but  the  landlord 
would,  nevertheless,  be  required  to  repair  those  portions 
of  the  house  not  exclusively  in  the  occupation  of  a  par- 
ticular tenant,  but  used  in  common  by  all  the  tenants  as, 
for  example,  the  entrance,  yards,  hallways,  etc.  Where 
a  landlord  is  obliged  to  keep  a  portion  of  the  premises 
under  repair,  his  obligation  is  to  keep  the  portion  in 
repair  for  the  use  for  which  it  was  intended.  Thus,  the 
landlord  is  under  no  obligation  to  keep  a  fire  escape  in 
such  repair  that  it  may  be  used  as  a  balcony  or  as  a 
platform  for  drying  clothes. 

The  matter  of  repairs  is  usually  provided  for  by  ex- 
press agreement,  and,  under  such  circumstances,  the 
agreement  itself  controls.  Where  a  landlord  has  obli- 
gated himself  to  make  certain  repairs,  and  has  failed  to 
do  so,  the  tenant  may  cause  the  repairs  to  be  made  and 
recover  the  expense  as  damages  for  breach  of  the  land- 
lord's contract,  or,  in  some  cases,  he  may  leave  the 
premises  and  recover  for  the  damages  sustained.  Where 
a  landlord  agrees  to  repair  a  ceiling  and  fails  to  do  so, 
he  is  not  liable  to  the  tenant  for  damages  for  personal 
injuries  sustained  by  the  tenant  from  the  fall  of  the 
ceiling.  The  tenant  has  his  option  either  to  repair  the 
ceiling  and  deduct  the  cost  from  the  rent,  or  to  move 
away  from  the  premises. 

In  the  absence  of  fraud,  there  is  no  warranty  implied 
on  the  part  of  the  landlord  that  the  building  is  safe  and 
convenient  or  suited  for  the  purpose  for  which  the 
tenant  takes  it.  If  the  tenant  claims  he  has  been  defrauded, 
he  must,  as  soon  as  he  discovers  the  fraud,  move  away, 
or  else  he  will  be  liable  for  the  rent. 

288 


Law  of  Landlord  and  Tenant 

Eviction 

The  tenant  is  not  liable  for  the  rent  if  he  has  been 
evicted.  Eviction  may  be  total  or  partial,  that  is  to  say, 
the  tenant  may  be  interfered  with  in  his  possession  of 
the  entire  property,  or  only  as  to  a  portion  of  the  prop- 
erty. Eviction  may  also  be  either  actual  or  constructive. 
Actual  eviction  explains  itself.  Constructive  eviction 
arises  from  a  condition  where  the  tenant's  enjoyment  of 
the  property  is  so  interfered  with  that  he  is  deprived  of 
the  beneficial  use  of  the  property.  Thus,  where  a  den- 
tist hired  the  second  floor  of  a  house  and  had  frequent 
callers  in  the  course  of  his  business,  and  the  bells  were 
muffled,  and  carpets  littered  with  rubbish,  and  loud  sing- 
ing indulged  in  on  the  stairway,  so  that,  as  a  result,  the 
business  of  the  tenant  was  injured,  it  was  held  to  be  an 
eviction.  But,  to  constitute  a  constructive  eviction,  the 
acts  complained  of  must  be  imputable  to  the  landlord. 
In  all  cases  of  constructive  eviction  the  tenant  is  liable 
for  rent  which  had  previously  become  due  and,  in  order 
to  plead  eviction  as  a  defense,  the  tenant  must  surrender 
the  premises. 

Clauses  in  Leases 

Forms  of  leases  are  procurable  at  the  various  law  sta- 
tioners. In  these  leases  blanks  are  left  for  the  insertion 
of  particular  clauses.  A  few  of  the  clauses  found  in 
leases  may  be  briefly  discussed: 

There  is  usually  a  covenant  on  the  part  of  the  tenant 
that  he  will  not  assign  his  lease,  nor  make  any  alterations 
in  the  property  without  first  obtaining  the  landlord's 
written  consent.  The  tenant  is  usually  required  to  ob- 
SQrve  a,ll  requirements  of  law  and  ordinance  and  all  reg- 


Practical  Real  Estate  Methods 

ulations  of  the  municipal  departments.  It  is  a  prudent 
thing  for  the  landlord  to  insert  a  clause  giving  him  per- 
mission to  visit  and  inspect  the  premises  at  reasonable 
times.  If  such  permission  be  not  provided  for,  the  land- 
lord has  no  right  to  enter  upon  the  property  without  be- 
coming a  trespasser. 

It  is  proper  to  insert  a  clause  specifying  the  use  to 
which  the  premises  shall  be  put,  and  prohibiting  the  use 
of  the  property  for  purposes  not  desired. 

Condemnation  Clauses 

The  frequency  of  proceedings  to  take  property  for 
a  public  purpose  renders  it  prudent  that  the  landlord 
should  protect  himself  against  any  claim  for  damages 
on  the  part  of  the  tenant,  in  case  the  leased  premises  are 
taken.  The  clause  providing  for  this  is  usually  called 
a  "condemnation  clause."  Such  clause  provides  that, 
in  case  the  premises  are  taken  by  condemnation  proceed- 
ings, the  lease  shall  cease  upon  the  day  that  the  legal 
title  to  the  property  shall  vest  in  the  party  instituting 
such  proceedings.  Such  a  clause  protects  the  landlord 
from  any  claim  on  the  part  of  the  tenant  for  loss  or 
damage  arising  from  the  termination  of  the  lease. 

While  the  matter  of  amount  of  rent  to  be  paid  is  us- 
ually the  subject  of  careful  negotiation  between  the  par- 
ties, and  is  finally  fixed  upon  as  a  reasonable  amount 
under  all  the  circumstances,  nevertheless,  if  condemna- 
tion proceedings  are  subsequently  brought,  we  are  very 
apt  to  find  that  the  tenant  will  claim  that,  by  being  de- 
prived of  the  premises,  he  has  lost  a  bargain.  In  other 
words,  the  tenant,  in  order  to  receive  damages,  is  prac- 
tically compelled  to  take  the  position  that  he  is  paying 

290 


Law  of  Landlord  and  Tenant 

less  rent  than  the  premises  are  worth.  This  contention 
on  the  part  of  a  tenant  usually  raises  an  acrimonious  dis- 
pute between  himself  and  the  landlord,  •  and  it  is  only 
fair  that  the  landlord  should  protect  himself,  by  a  proper 
clause  in  the  lease,  from  this  danger. 

The  tenant  is  usually  called  upon  to  covenant  to  quit 
and  surrender  the  premises  in  good  condition.  He  is 
liable  to  the  landlord  for  any  injury  done  to  the  freehold, 
for  waste,  as  it  is  called,  and  for  breach  of  his  covenants. 


291 


ESTATES  AND  INTERESTS  ARISING 
FROM  MARRIAGE 

CHARLES  L.  BURR 

Common  Law  Interests — Statutory  Modifications — 
Curtesy — Effect  of  Children — Dower — Defeat  of 
Dower  Rights — Assignment — Contractual  Modifica- 
tions— Mortgages 

RIGHTS  and  interests  arising  from  marriage  may  be 
classified  as :  ( i )  The  husband's  rights  during  mar- 
riage; (2)  the  husband's  rights  after  the  death  of 
his  wife — or  curtesy;  (3)  the  wife's  rights  during  mar- 
riage; (4)  the  wife's  rights  after  the  death  of  her  hus- 
band— or  dower,  and  (5)  homestead  rights.  These 
interests  are,  of  course,  predicated  upon  lawful  marriage. 
A  marriage  which  is  voidable  only  gives  rise  to  the  same 
rights  and  interests,  if  not  annulled  during  the  life  of 
the  husband. 

Marriage  is  an  ordinary  civil  contract,  made  by  a 
man  and  a  woman  in  due  form  of  law.  It  differs  from 
other  legal  contracts  only  in  that  when  once  entered 
into  it  may  not  be  rescinded.  The  legality  of  the  mar- 
riage contract,  at  least  for  the  purpose  of  determining 
the  rights  and  interests  arising  out  of  it,  is  to  be  ascer- 
tained, as  with  other  contracts,  by  the  law  of  the  place 
where  the  contract  was  made. 

At  common  law  the  husband  has,  by  right  of  mar- 
riage, an  estate  carved  out  of  his  wife's  real  property, 

292 


Estates  from  Marriage 

which  entitles  him  to  the  rents  and  profits  thereof,  fret 
from  the  claims  of  his  wife.  He  can  sell  and  convey 
this  estate  without  her  consent — her  signature  to  such  a 
conveyance  not  being  required — and  it  may  be  seized 
and  sold  under  execution  for  the  payment  of  his  debts. 

This  estate,  known  as  the  "husband's  right  during 
coverture,"  continues  until  his,  or  his  wife's  death — or, 
until  they  are  divorced — or,  there  is  a  child  of  the  mar- 
riage born  alive — whereupon  this  estate  falls,  and  in  its 
place  arises  an  estate  of  curtesy.  If  the  wife  survive 
her  husband,  then  she  becomes  repossessed,  in  full,  of 
her  real  property  and  all  estate  therein,  after  his  death, 
and,  as  he  could  convey  only  his  estate,  and  his  creditors 
can  attack  and  sequester  only  the  same  estate,  the  wife's 
real  property  is  not  thereafter  affected  by  any  of  his 
prior  conveyances,  or  by  the  acts  of  any  of  his  creditors. 
The  wife's  chattels  real — that  is,  chattels  which  concern 
and  savor  of  real  property — become  the  property  of  the 
husband  for  certain  purposes.  During  his  life  they  are 
liable  to  be  taken  on  execution  for  his  debts;  he  may 
sell  and  convey  them  without  the  wife's  consent,  and 
upon  her  death  they  become  his  absolutely.  He  cannot, 
however,  dispose  of  her  chattels  real  by  will,  but  if  the 
wife  survive,  and  her  husband  has  not  disposed  of  her 
chattels  real  during  his  life,  she  again  comes  into  pos- 
session and  ownership  of  her  property. 

As  a  forerunner  of  coming  statutory  modifications  of 
the  husband's  rights  during  marriage,  and  as  indicative 
of  a  changing  public  policy,  there  was  introduced  by  the 
Courts  of  Equity  the  doctrine  of  the  wife's  equity  to  a 
settlement,  by  which,  when  the  husband  came  into  equity, 
for  the  purpose  of  relief  with  respect  to  his  wife's  real 
property,  he  was  compelled  to  make  a  provision  out  of\ 

293 


Practical  Real  Estate  Methods 

it  for  the  support  of  his  wife  and  children,  this  being 
merely  an  application  of  the  equitable  maxim  "that  he 
who  seeks  equity  must  first  do  equity." 

Property  thus  settled  upon  the  wife  receives  generally 
the  designation  "her  sole  and  separate  estate,"  but  may 
conveniently  be  termed,  "her  equitable  separate  estate" 
to  distinguish  it  from  her  "statutory  separate  estate" 
hereafter  referred  to. 

It  was  at  one  time  regarded  as  necessary  that  the 
legal  title  to  the  property,  so  freed  from  the  husband's 
control,  should  be  vested  in  a  trustee,  but  it  later  became 
settled  that  "if  property  be  given  or  devised  to  a  mar- 
ried woman  for  her  separate  and  exclusive  use,  even 
without  the  intervention  of  trustees,  her  interest  will  be 
protected  from  the  claims  of  her  husband  and  of  his 
creditors;  the  husband,  in  such  case,  though  he  obtains 
a  legal  estate  in  the  property  for  their  joint  lives,  being 
regarded  as  a  trustee  for  the  wife.  The  words  used 
most  frequently  to  create  this  estate  are  "sole  and  sep- 
arate use,"  but  any  language  is  sufficient,  provided  it 
shows  a  clear  intention  to  excJude  all  control  of  the  hus- 
band. 

A  most  striking  peculiarity  may  be  noticed  in  the 
instrument  vesting  the  property  in  the  wife  with  respect 
to  restricting  her  powers  over  it,  in  that  it  is  lawful  to 
absolutely  prohibit  its  conveyance  by  her.  This  excep- 
tion to  the  general  rule  forbidding  absolute  restraint  on 
alienation  being  allowed  in  order  that  she  may  be  pro- 
tected from  the  effect  of  her  husband's  persuasion. 

In  England,  and  in  some  of  the  States  of  this  country, 
in  the  absence  of  such  a  restraint  on  conveyance,  the 
wife  is  free  to  convey  or  charge  such  estate  as  she  may 
choose,  while  in  other  States  it  is  held  she  has  but  the 


Estates  from  Marriage 

power  of  disposition  given  expressly  by  the  instrument 
creating  the  estate. 

The  rights  of  the  husband  in  property  which  is  held 
by  the  wife  for  her  separate  use  are  suspended  only  dur- 
ing coverture,  and,  on  the  wife's  death,  he  has  the  same 
right  in  her  separate  estate  as  in  her  property  not  so 
limited,  unless  such-  rights  are  excluded  by  the  terms  of 
the  instrument  vesting  the  property  in  her. 

The  husband's  common  law  interest  in  his  wife's  real 
property  and  chattels  real  has,  in  recent  years,  either 
been  abrogated  or  greatly  diminished  by  what  are  known 
as  the  "married  women's  property  acts."  Property  thus 
held  by  the  wife,  freed  either  wholly  or  in  part  from  any 
claim  or  control  by  her  husband,  is  known  as  the  wife's 
"statutory  separate  estate,"  and  is,  in  reality,  the  child 
of  the  parent  equitable  rule,  known  as  the  wife's  "equi- 
table separate  estate."  While  courts  have  no  legislative 
powers,  they  not  infrequently  prepare  the  road  upon 
which  proper  legislation  must  travel. 

Statutory  Changes 

At  the  present  time,  in  most,  if  not  all  of  the  States  of 
the  United  States,  real  property  acquired  by  a  woman 
before  marriage  is  her  "statutory  separate  estate"  and 
is  free,  in  whole,  or  in  part,  from  the  husband's  control 
in  varying  degrees  as  the  acts  of  the  various  legislatures 
differ.  In  most  of  the  States  real  property  acquired  by 
the  wife  after  marriage,  is  likewise  withheld  by  statute 
from  the  husband's  control.  This  statutory  separate 
estate  of  the  wife  is  not,  as  of  old,  liable  for  the  hus- 
band's debts.  The  husband  still  has,  however,  that  right 
of  possession  which  is  incidental  to  his  right  to  live  with 

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his  wife,  since  these  statutes  do  not  affect  the  family 
relation. 

The  power  of  the  wife  to  dispose  of  such  separate 
estate  is  usually  determined  by  the  provisions  of  the 
statute  by  which  it  is  created.  Her  statutory  real  prop- 
erty she  cannot,  perhaps  in  a  majority  of  the  States,  dis- 
pose of  by  conveyance  without  the  joinder,  or  at  least 
the  written  consent,  of  her  husband,  though  in  some 
States,  notably  New  York,  the  statute  clearly  gives  her 
the  power  so  to  do. 

Curtesy 

Upon  the  death  of  the  wife  the  surviving  husband  is 
entitled,  for  the  period  of  his  life,  to  an  estate  by  curtesy 
in  the  real  property  of  which  the  wife  was  seized  during 
marriage,  provided  there  was  issue  of  the  marriage  born 
alive,  capable  of  inheriting. 

Curtesy  is  frequently  defined  as  "an  estate  for  life, 
accruing  to  the  husband  on  the  death  of  his  wife  in  the 
real  property  of  which  she  was  seized  in  possession ;  in 
fee  simple;  or,  fee  entail,  during  marriage,  provided 
he  has  had  by  her  lawful  issue  capable  of  inheriting  the 
estate,  born  alive,  prior  to  her  death." 

Curtesy  to  the  husband  resembles  dower  in  the  wife 
as  regards  the  things  in  which  it  exists  and  the  quantum, 
and  nature  of  the  estate,  or  interest,  in  the  consort  nec- 
essary to  support  it. 

It  differs  from  dower  primarily  in  that  it  is  in  favor 
of  the  husband,  and  not  the  wife ;  that  it  is  not  restricted 
to  one-third  of  the  wife's  real  property;  that  it  is  con- 
tingent on  the  birth  of  issue ;  that,  after  birth  of  issue,  it 
exists  as  an  estate,  and  that  it  is  perfected  by  the  wife's 
death  without  assignment. 

296 


Estates  from  Marriage 

At  common  law,  in  the  case  of  dower,  it  is  necessary 
the  husband  should  be  actually  seized  and  possessed  of 
the  real  property  and  so,  in  the  case  of  curtesy,  it  is 
necessary  that  the  wife  should  be  seized  and  possessed 
of  her  real  property — constructive  ownership  and  pos- 
session not  being  sufficient. 

In  the  absence  of  a  statutory  provision  to  the  con- 
trary— one  not  found  in  the  statutory  law  of  New  York 
— there  must  be  issue  of  the  marriage  born  alive,  and 
such  issue  must  be  capable  of  inheriting  property  in 
which  the  curtesy  is  claimed,  in  order  that  the  estate  by 
curtesy  may  become  perfected  in  the  husband.  The 
length  of  the  child's  life  is  immaterial;  it  matters  not 
whether  it  be  alive  at  the  time  of  the  mother's  death, 
provided,  it  was  born  alive,  and  the  right  to  curtesy  is 
not  affected  by  its  death  before  that  of  its  mother.  Nor 
need  the  birth  of  issue  and  the  ownership  of  the  wife 
be  contemporaneous,  consequently,  if  a  child  is  born  at 
any  time  during  marriage,  the  husband  is  entitled  to 
curtesy  in  property  which  the  wife  may  previously  have 
acquired,  and  which  she  has  conveyed,  or,  of  which  she 
has  otherwise  been  divested,  or,  in  property  which  she 
acquires  after  the  child's  death.  In  some  States  the  re- 
quirement of  birth  of  issue  has  been  removed  by  statute. 

Curtesy,  like  dower,  exists  in  lands  and  tenements, 
and,  accordingly,  it  exists  in  incorporeal  real  things,  such 
as  rents. 

Unless  authorized  by  statute,  or  the  power  is  ex- 
pressly given  her  for  the  purpose,  the  wife  cannot,  by 
her  sole  conveyance  during  marriage,  affect  the  hus- 
band's right  to  curtesy.  But  in  some  States  the  statute 
gives  the  husband  curtesy  only  in  property  of  which  the 
wife  died  seized,  and  there  a  conveyance  by  the  wife 

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alone,  during  marriage,  if  by  statute  she  has  power  to 
make  a  sole  conveyance,  will  defeat  curtesy. 

Under  some  statutes  she  may  by  devise  of  a  separate 
estate,  defeat  curtesy,  but  generally  the  fact  that  she  is 
authorized  to  dispose  of  the  property  will  not  enable  her 
to  thereby  defeat  curtesy,  and,  apart  from  these  statutes 
she  cannot  devise  her  lands  even  with  her  husband's 
consent,  free  from  curtesy  since  this  would,  in  effect,  be 
devise  of  his  property. 

The  curtesy  is  usually  defeated  by  a  conveyance  by  the 
wife  before,  but  not  after  marriage,  unless  she  is,  by 
the  conveyance  to  her,  given  power  to  dispose  of  the 
property;  by  a  contract  of  the  husband  releasing  cur- 
tesy; by  his  joinder  in  the  conveyance  with  her;  or,  by 
a  divorce. 

In  some  States  curtesy  has  been  abolished  by  statute 
and  in  others  it  has  been  modified. 

But  the  husband  may  exclude  himself  from  curtesy  by 
a  contract  made  before  marriage,  or  by  one  made  after 
marriage,  providing  the  law  of  that  jurisdiction  allows 
contracts  between  husband  and  wife,  such  as  are  permis- 
sible by  the  laws  of  the  State  of  New  York. 

By  joining  with  his  wife  in  a  conveyance,  or  mort- 
gage, of  the  land,  the  husband  thereby  releases  his  cur- 
tesy, at  least  as  against  that  grantee,  and  his  joinder  in 
her  will  may,  by  statute,  have  the  same  effect. 

A  divorce  annulling  the  marriage — that  is,  a  decree 
declaring  the  marriage  contract  to  have  been  voidable — 
will  deprive  the  husband  of  his  estate  of  curtesy,  but  a 
mere  dissolution  of  the  bonds  of  matrimony — that  is, 
what  we  commonly,  but  often  inaccurately,  call  "a  di- 
vorce"— does  not  affect  the  husband's  rights.  Many 
States — including  New  York — have  enacted  laws  which 


Estates  from  Marriage 

deprive  the  husband  of  his  estate  by  curtesy  if  the  di- 
vorce be  granted  for  the  fault  of  the  husband. 

Upon  the  birth  of  a  child  capable  of  inheriting,  the 
husband  is  said  to  be  a  tenant  "by  the  curtesy  initiate," 
and  he  becomes  tenant  "by  the  curtesy  consummate" 
after  the  death  of  his  wife.  A  tenant  by  "the  curtesy 
initiate"  has,  at  common  law,  a  freehold  estate  in  the 
land  which  he  has  full  power  to  convey,  and  it  is  bound 
by  a  judgment  against  him  and  liable  to  sale  on  execu- 
tion. In  New  York  State,  as  in  many  others,  however, 
the  husband  has,  until  his  wife's  death,  no  estate  that 
he  can  convey,  or  which  is  subject  to  sale  on  execution. 
In  this  State,  as  in  all  others,  the  estate  of  curtesy,  when 
consummated  by  the  death  of  the  wife,  may  be  sold  and 
conveyed  the  same  as  any  other  interest  in,  or  ownership 
of,  real  property. 

Upon  the  death  of  the  wife,  the  husband  is  entitled  to 
immediate  possession,  without  the  necessity  of  any  as- 
signment, such  as  is  always  necessary  in  the  case  of 
dower,  owing  to  the  fact  that  the  latter  estate  exists  in 
one-third  only  of  the  decedent's  property.  He  takes  it 
by  operation  of  law  as  by  descent,  rather  than  by  pur- 
chase, and  for  this  reason  he  cannot,  by  a  written  dis- 
claimer or  otherwise,  refuse  to  take  it,  and  cause  it  to 
remain  in  others. 

The  husband  thereafter  holds  the  property  with  the 
same  rights  and  liabilities  as  any  life  tenant.  He  may 
convey,  or  encumber  it,  and  it  may  be  subjected  to 
execution  for  his  debts.  It  must  be  borne  in  mind  that 
it  is  only  his  life  estate  which  can  be  conveyed  and  sold — 
not  the  fee  of  the  property,  for  that  descends  to  the 
heirs  of  the  deceased  mother. 

In  a  number  of  those  States  where  curtesy  has  been 

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expressly  abolished  by  statute,  occasionally  the  husband 
is  given,  in  place  of  curtesy,  an  estate  similar  to  the 
widow's  dower.  The  statutes  giving  married  women 
full  control  of  their  property  are  generally  held  not  to 
abolish  curtesy,  though  they  in  effect  restrict  the  estate 
to  such  property  as  the  wife  has  at  her  death. 

It  seems  that  by  reason  of  the  statutes  of  the  State 
of  New  York,  the  separate  property  of  the  wife  may 
be  conveyed  without  her  husband's  consent;  that  it  is 
not  essential  he  should  join  in  the  deed  of  conveyance, 
and  that  his  estate,  by  the  curtesy,  attaches  only  to  such 
property  as  she  was  seized  of  at  the  date  of  her  death. 
Many  conveyances,  however,  out  of  an  abundance  of 
precaution,  still  insist  the  husband  join  his  wife  in  all 
conveyances  of  her  separate  estate. 

Dower 

Dower,  at  common  law,  is  the  estate  to  which  a  wife 
is  entitled,  upon  the  death  of  her  husband,  for  the  period 
of  her  natural  life,  in  one-third  of  the  lands  and  tene- 
ments of  which  her  husband  was  seized  in  fee,  at  any 
time  during  marriage,  and  which  her  issue,  if  any,  might 
inherit. 

It  will  be  seen  that  the  common  law,  favoring  man 
always — as  the  Christian  yields  to  his  Creator,  or  the 
subject  favors  his  king — grants  to  him  a  life  estate  in 
the  entire  real  property  of  his  wife,  while  the  latter,  by 
dower,  obtains  a  like  estate  in  but  one- third  of  the  real 
estate  of  her  spouse. 

Dower  is  also  allowed  in  lands  in  which  the  husband 
has  an  equitable  interest  corresponding  to  a  legal  estate 
of  inheritance — such  as  lands  claimed  under  a  contract 

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of  purchase;  mortgaged  lands,  and  also  personalty  re- 
garded, in  equity,  as  land — chattels  real. 

This  question  of  dower  is  ever  present,  and  one  of 
very  practical  application;  it  arises  upon  every  convey- 
ance and  a  purchaser  is  bound  to  inquire  whether  his 
grantor  is  married  and  satisfy  himself  of  the  proper 
marriage  status  of  the  female  joining  in  the  conveyance, 
if  any. 

The  press  of  a  late  day  has  commented  quite  exten- 
sively upon  the  acts  of  a  certain  bank  president  residing 
in  an  adjoining  borough  and  currently  report  convey- 
ances made  by  him  as  "a  widower."  It  was  developed 
he  has,  at  least,  one  wife  living,  who,  of  course,  cannot 
be  deprived  of  her  dower  interest  by  his  conveyances  as 
"a  widower,"  and,  as  a  consequence,  his  grantees  must 
look  to  his  personal  warranty  in  the  instrument  of  con- 
veyance, or  to  such  other  remedy,  at  law  or  in  equity, 
as  may  arise  from  each  particular  transaction,  for  a 
recovery  of  the  damage  they  sustain.  It  may  be  re- 
marked in  passing  that  such  incidents  are  not  overlooked 
by  title  insurance  companies,  and  the  publicity  which 
they  encourage  is  not  wholly  unselfish.  Title  insurance, 
especially  in  this  regard,  is  but  the  added  warranty  of 
a  third  person  covenanting  that  the  grantor's  warranties 
are  true,  but  learned  and  expert  counsel  for  these  in- 
stitutions have  so  encompassed  their  contracts  with 
"buts,"  "ifs"  and  "provisos"  that  even  the  traditional 
"Philadelphia  lawyer"  finds  difficulty  in  ascertaining  the 
true  intent  and  worth  of  such  insurance.  However,  the 
inexperienced  can  hardly  afford  to  dispense  with  it. 

Dower  exists  in  land  held  by  the  husband  in  tenancy 
in  common,  or  coparcenary,  but  not  in  that  held  in  joint 
tenancy,  except  as  a  result  of  statutory  changes,  for,  as 

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Practical  Real  Estate  Methods 

you  have  doubtless  heretofore  learned,  the  surviving  joint 
tenants  take  the  interest  of  a  deceased  joint  tenant. 

Dower  may  be  barred,  or  defeated,  by  one  of  eight 
methods : 

(1)  A  conveyance  by  the  husband  before  marriage, 
if  not  made  in  fraud  of  his  wife's  rights,  though  a  con- 
veyance by  him  after  marriage  will  not  have  that  effect. 

(2)  A  destruction  of  the  husband's  estate,  either  by 
a  paramount  title,  by  entry  for  breach  of  condition,  or  by 
sale  under  a  mortgage  or  other  lien,  superior  to  the  dower 
right. 

(3)  A  written  release  by  the  wife  in  favor  of  one 
purchasing,  or  owning  the  land,  and  this  is  usually  con- 
tained in  the  husband's  conveyance,  or  mortgage,  and 
explains  why  the  wife  must  join  her  husband  in  a  con- 
veyance, or  mortgage,  of  his  real  property. 

(4)  A  testamentary  provision  by  the  husband,  in  favor 
of  the  wife,  in  lieu  of  her  dower  rights,  provided  she 
elect  to  accept  thereof. 

(5)  An   antenuptial    contract   by   the   wife    releasing 
dower,  in  consideration  of  other  provisions  made  for  her. 

(6)  A  divorce,  or  in  some  States  divorce  for  the  wife's 
fault  only. 

(7)  In  some  States,  but  not  in  New  York,  the  elope- 
ment and  adultery  of  the  wife. 

(8)  Conduct  on  the  wife's  part  constituting,  in  law, 
an  estoppel  as  against  her  rights  to  claim  dower. 

Until  the  husband's  death  the  wife  has  merely  a  con- 
tingent right  in  her  husband's  lands,  known  as  "dower 
initiative,"  which  she  may  release,  but  not  convey.  After 
his  death  the  dower  right  ceases  to  be  contingent,  and 
is  known  as  "dower  consummate,"  which  may  be  con- 
veyed by  her,  in  equity,  and  in  some  States  at  law.  She 

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has,   however,   no   dower   estate   until   dower  has  been 
assigned  to  her. 

Assignment  of  Dower 

The  ascertainment  and  setting  off  to  the  widow  of 
the  part  of  the  husband's  property  in  which  the  estate 
of  dower  shall  exist,  is  known  as  the  "assignment  of 
dower."  The  assignment  must  be  of  one-third  of  the 
productive  value  of  the  property  at  the  time  of  the 
assignment,  except  that  improvements  by  one  to  whom 
the  husband  has  conveyed  property  during  marriage 
without  his  wife's  consent,  are  not  included  in  the  valua- 
tion. If  dower  is  not  assigned  to  the  widow,  she  may 
institute  proceedings  to  compel  assignment,  and  may 
therein  usually  recover  damages  for  delay  in  assignment, 
or  may,  in  an  equitable  proceeding,  have  an  account  of 
rents  and  profits. 

Dower  has  been  abolished  by  statute  in  some  States, 
but  not  in  New  York;  the  widow  being  sometimes  given 
an  absolute  share  in  the  husband's  lands  in  lieu  of  dower, 
while,  in  still  other  States,  she  has  the  right  to  elect 
between  dower  and  a  statutory  share. 

In  order  that  the  widow  be  entitled  to  dower,  the 
husband's  ownership  need  not  have  continued  for  any 
particular  time,  it  being  sufficient  that  it  was  but  mo- 
mentary, the  title  passing  out  of  him  immediately  after 
its  acquisition.  It  is  generally  in  connection  with  the 
question  of  the  duration  of  the  seisin,  or  title,  that  con- 
sideration is  given  to  a  class  of  cases  in  which  the  title 
to  the  land  is  acquired,  and  disposed  of,  by  separate 
instrument,  which,  however,  constitute  together  but  one 
transaction,  and,  in  such  cases,  the  title  of  the  husband, 
frequently  termed  "transitory  seisin,"  is  not  considered 

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Practical  Real  Estate  Methods 

to  be  of  such  a  character  as  to  support  dower,  as  against 
the  rights  of  those  in  favor  of  whom  a  disposition  is 
thus  simultaneously  made  by  the  husband.  The  most 
common  instance  of  the  application  of  this  principle  is 
seen  in  cases  in  which  a  purchaser  of  property,  on  re- 
ceiving a  deed  thereof,  gives  to  his  vendor  a  "purchase 
money  mortgage,"  to  secure  the  payment  of  the  whole, 
or  a  part,  of  the  purchase  price.  It  is  unnecessary  the 
wife  should  sign  such  mortgage  because  the  deed  and 
mortgage  are  considered  part  of  one  transaction  and 
the  purchaser  does  not  take  such  a  title  as  will  give  a 
right  of  dower  to  his  wife  as  against  the  mortgagee, 
though  as  against  all  other  she  is  entitled  to  dower.  The 
same  principle  applies  where  the  purchaser  of  the  prop- 
erty, instead  of  giving  a  purchase  money  mortgage  to 
the  vendor,  gives  a  mortgage  in  pursuance  of  a  prior 
agreement,  and  as  part  of  the  same  transaction,  to  a  third 
person,  who  furnishes  the  purchase  money,  and  the  right 
of  dower  is  subordinated  to  the  mortgage  so  given. 
And  even  though  no  mortgage  be  given,  the  vendor's 
lien  for  the  price,  which  in  many  of  the  States  arises  by 
operation  of  law,  takes  precedence  of  dower. 

The  widow  is  entitled  to  dower  in  mines  and  quarries 
belonging  to  her  husband  which  were  opened  and  worked 
during  his  life,  whether  they  be  located  on  his  or  an- 
other's land,  but,  strange  to  say,  she  cannot  open  new 
mines,  even  in  the  lands  assigned  to  her  as  dower,  on 
the  absurd  theory  that  this  would  constitute  waste. 

In  the  case  of  exchanged  lands  it  was  formerly  held 
that  the  wife  was  entitled  to  dower  in  the  parcel  acquired 
and  the  parcel  conveyed  in  exchange,  but  common  sense, 
which  is  supposed  to  be  good  law  and  equity,  has  changed 
the  rule  so  that  it  now  requires  the  widow  to  choose, 

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Estates  from  Marriage 

whether  she  shall  have  dower  in  those  given,  or  received, 
by  her  husband. 

By  the  making  of  a  mortgage,  in  England,  and  in  a 
number  of  the  States  of  this  country,  the  legal  title  is 
transferred,  and  thereafter  an  equitable  title  only,  known 
as  the  "equity  of  redemption/'  remains  in  the  mortgagor. 
In  this  "equity  of  redemption,"  as  in  other  equitable 
interests,  the  courts  refuse  to  recognize  any  right  of 
dower.  But  a  different  view  has  generally  been  taken 
by  the  courts  of  this  country,  it  being  held  that,  though 
the  land  of  the  husband  is  subject  to  a  mortgage,  which 
takes  precedence  of  dower,  the  wife  is  entitled  to  dower 
therein  as  against  all  persons  except  the  owner  of  the 
mortgage. 

If  the  mortgage  is  paid  by  the  husband  before  his 
death,  or  by  his  legal  representative  after  his  death,  the 
widow  is  entitled  to  the  benefit  of  such  payment  and 
may,  accordingly,  have  dower  as  though  the  mortgage 
never  existed.  But  if  the  mortgage  is  paid,  after  the 
death  of  the  husband,  by  an  heir,  or  devisee,  or  other 
person  interested  in  the  land,  the  widow  must  contribute 
a  proportionate  part  of  the  amount  paid.  If  the  mort- 
gage is  paid  by  a  purchaser  from  the  husband,  as  a  part 
of  the  contract  of  purchase,  it  is  as  if  it  were  paid  by  the 
husband  and  the  mortgage  is  extinguished  as  against 
the  widow's  claim  of  dower,  while  it  is  otherwise  if  the 
purchaser  voluntarily  pays  it. 

Since  a  mortgagee  is  entitled,  at  most,  to  a  mere  legal 
estate  for  the  purpose  of  securing  his  claim,  and,  in 
many  of  the  States,  no  more  than  a  lien,  his  widow  is  not 
entitled  to  dower. 

The  interest  of  one  as  tenant  in  common,  or  as  co- 
parcener with  others,  is  subject  to  dower.  Where  the 

305 


Practical  Real  Estate  Methods 

land,  jointly  owned,  is  partitioned,  the  widow  of  one 
co-tenant  is  entitled  to  dower  in  such  part  of  the  land 
as  is  set  off  to  her  husband  in  severalty,  and,  as  a  general 
rule,  in  such  part  only.  If  there  is  a  sale  of  the  land  by 
order  of  court,  for  the  purpose  of  making  partition, 
during  the  husband's  life,  the  wife,  if  a  party  to  the 
proceeding,  loses  her  dower  right  in  the  land. 

A  conveyance  by  the  husband  before  marriage  will 
bar  the  wife's  dower  since  the  one  essential  of  dower — 
ownership  during  marriage — is  wanting.  But  this  gen- 
eral rule  is  subject  to  an  exception  in  this  country,  in 
case  the  conveyance  by  the  husband  is  in  fraud  of 
dower — that  is,  is  intended  to  deprive  his  future  wife 
of  dower.  One  may,  however,  before  marriage,  make 
a  reasonable  provision  for  his  children  of  a  former 
marriage. 

Except  where  statute  otherwise  provides,  the  husband 
cannot,  by  making  conveyance  of  property  during  mar- 
riage, without  wife's  joinder,  bar  the  latter's  dower.  The 
only  possible  exception  to  this  rule  exists  in  the  dedica- 
tion of  lands  for  public  use,  which,  it  has  been  decided, 
excludes  the  dower  right.  This  is  upon  the  grounds 
of  public  policy.  Likewise  where  land  is  condemned  for 
public  use  during  the  husband's  life,  the  wife  loses  her 
right  of  dower  therein. 

In  a  number  of  States  of  this  country,  however,  it 
is  provided  by  statute  that  the  widow  shall  have  dower 
only  in  such  land  as  the  husband  is  seized  or  possessed 
of  at  the  time  of  his  death.  But  even  the  statute 
enabling  a  husband  to  convey  lands  flee  from  dower, 
does  not  authorize  a  conveyance  by  him  for  an  inadequate 
compensation  for  the  simple  purpose  of  barring  dower, 
the  same  principle  being  applied  to  such  a  case  as  to  a 


Estates  from  Marriage 

conveyance  by  the  husband  before  marriage.  A  mortgage 
by  the  husband  alone,  during  marriage,  stands  on  the 
same  footing  as  an  absolute  conveyance  by  him  so  far 
as  regards  the  right  of  dower. 

The  fact  that  one  to  whom  the  husband  conveyed  the 
land  was  a  purchaser  for  value  without  notice  of  the 
existence  of  a  wife  having  dower  rights  does  not  affect 
her  claim  for  dower,  unless,  according  to  some  decisions, 
her  conduct  was  of  such  a  misleading  character  as  to 
estop  her  from  making  the  claim. 

By  the  foreclosure  of  a  mortgage  signed  by  the  wife, 
her  dower  is  barred,  but  not  so  if  she  did  not  join  in 
the  instrument.  The  dower  right  is  also  liable  to  be 
divested  or  impaired  by  the  enforcement  of  other  liens 
which  may  have  existed  upon  the  property  before  mar- 
riage, or  before  it  passed  to  the  husband,  but  it  is  superior 
to  a  lien  to  which  the  property  becomes  subject  in  the 
hands  of  the  husband  after  marriage,  except  in  those  few 
States  in  which  dower  exists  only  in  the  lands  of  which 
the  husband  died  seized,  where  it  would  be  divested  by 
a  sale  to  enforce  the  lien. 

The  wife  may  release  her  right  of  dower  either  in- 
choate or  consummate,  to  a  person  seized  of  a  freehold 
interest  in  the  land.  Such  a  release  is,  however,  usually 
ineffective  unless  the  husband  joins  therein.  In  the  ab- 
sence of  statutes  authorizing  such  transactions  between 
husband  and  wife,  the  wife  cannot  usually,  after  the 
marriage,  release  her  dower  directly  to  her  husband,  or 
agree  with  him  to  relinquish  it,  in  consideration  of  other 
provisions  made  by  him  for  her. 

The  release  of  dower,  since  it  involves  an  interest  in 
lands,  is  within  the  Statute  of  Frauds  and  must  be  by  an 
instrument  in  writing. 

307 


Practical  Real  Estate  Methods 

Barring  Dower 

In  this  country  the  custom  has  universally  prevailed 
of  barring  dower  by  the  joinder  of  the  wife  in  a  deed 
to  the  land  by  the  husband,  and  this  method  of  barring 
dower  is  valid  in  cases  where  the  conveyance  is  by  way 
of  mortgage,  as  well  as  when  it  is  absolute.  The  con- 
veyance should  contain  apt  words  indicating  the  wife's 
intention  to  release  her  dower  and,  accordingly,  her  mere 
joinder  in  the  execution  of  her  husband's  deed  has  been 
regarded  as  insufficient.  By  the  statutes  of  most  States, 
it  is  necessary  that  the  wife  acknowledge  the  conveyance, 
the  requirements  in  this  respect  being  usually  made  the 
same  as  those  imposed  in  the  case  of  a  conveyance  of 
the  land  of  a  married  woman,  and,  in  some  States — 
notably,  New  Jersey — she  must  be  examined  separately 
and  apart  from  her  husband  in  order  to  determine  that 
she  is  not  acting  under  coercion  by  him.  These  require- 
ments as  to  acknowledgment  have  been  generally  re- 
garded as  absolute,  so  that  a  non-compliance  therewith 
will  render  the  instrument  ineffective  as  a  release  of 
dower. 

If  the  husband's  will  contains  a  provision  for  his  wife, 
which  is  intended  to  be  in  lieu  of  dower,  and  she  accepts 
it,  she  cannot  claim  dower.  As  the  right  of  dower  is 
itself  a  clear  legal  right,  an  intention  to  exclude  that 
right  by  voluntary  gift  must  be  demonstrated  by  express 
words,  or  by  clear  and  manifest  implication. 

In  order  that  a  testamentary  provision  for  the  widow 
may  bar  her  right  of  dower,  it  is  necessary  that  she 
accept  it,  she  having  what  is  known  as  a  "right  of  elec- 
tion," whether  she  will  take  her  dower  or  the  testamen- 
tary gift.  In  order  that  the  election  be  binding,  it  must 

308 


Estates  from  Marriage 

be  made  with  full  knowledge,  on  the  widow's  part,  of 
the  condition  of  her  husband's  estate,  and  the  relative 
values  of  her  dower  interest  and  the  testamentary  pro- 
vision. Such  election  is  either  regulated  by  statute  or 
required  by  law  to  be  exercised  within  a  reasonable  time. 

No  general  rule  as  to  what  acts  on  the  widow's  part 
constitute  an  election  can  be  stated,  but  usually  her  actual 
receipt  of,  or  entry  upon,  the  property  given  her  by  will, 
with  full  knowledge  of  the  facts,  and  retention  and 
enjoyment  thereof  for  a  considerable  time,  will  be  con- 
strued as  an  acceptance  of  the  testamentary  provision.  In 
some  States  the  election  must  be  express  and  in  others 
it  may  be  implied,  as  just  indicated. 

Since,  in  order  to  entitle  one  to  dower,  she  must  have 
been  the  wife  of  the  owner  of  the  land  at  the  time  of 
his  death,  an  absolute  divorce,  even  though  for  the  hus- 
band's fault,  has  always  been  regarded,  at  common  law, 
as  divesting  dower.  Occasionally  it  is  provided  by  sta- 
tute that  a  divorce  for  the  fault  of  the  husband  shall 
not  bar  dower  and  such  a  statute  sometimes  requires 
dower  to  be  assigned  immediately  upon  divorce,  without 
awaiting  the  husband's  death.  In  this  State,  if  the 
divorce  be  granted  for  the  husband's  adultery,  he  loses 
his  right  to  curtesy  while  his  divorced  wife  retains 
her  right  to  dower  in  any  real  estate  of  which  he  then 
is  or  was  seized.  In  case  the  divorce  be  granted  to 
the  husband  because  of  his  wife's  guilt,  his  interests  in 
her  real  and  personal  property  remain  unaffected,  but 
she  is  by  such  decree  of  divorce  barred  of  all  her  dower 
interests. 

The  widow,  it  has  been  held,  may  be  estopped  to  claim 
dower  by  having  made  statements  to  intending  purchasers 
that  she  will  make  no  such  claim,  but  she  is  not,  it  seems, 

309 


Practical  Real  Estate  Methods 

estopped  by  mere  failure  to  assert  her  claim  at  the  time 
of  the  sale  of  her  husband's  land.  She  has  been  held 
to  be  estopped  by  knowledge  that  her  husband  was  living 
with  another  woman  as  his  wife  and  failure  to  assert 
her  rights  during  his  life. 

Unless  it  is  otherwise  agreed,  or  it  is  impracticable 
or  inequitable,  dower  must  be  assigned  by  metes  and 
bounds. 

And  in  order  that  such  assignment  be  valid,  it  must, 
in  the  absence  of  agreement  otherwise,  be  of  an  estate 
for  life,  free  from  any  condition  or  exception.  In  some 
cases,  assignment  by  metes  and  bounds  is  impracticable, 
or  is  so  inequitable  that  it  will  not  be  sanctioned  by  a 
court  and  in  these  cases  another  method  must  be  adopted. 
Accordingly,  if  the  property  is  so  situated  that  it  cannot 
be  divided  by  metes  and  bounds,  then  the  widow  may 
be  granted  a  proportionate  part  of  the  rents  and  profits, 
or,  in  some  cases,  a  right  of  alternative  occupation  and 
enjoyment. 

This  principle  is  applied  in  cases  of  mines,  dower  in 
which  would,  if  practicable,  be  assigned  by  metes  and 
bounds,  but  which  may  be  otherwise  assigned  in  the 
form  of  a  share  of  the  rents,  or  profits,  or  a  right  of 
alternative  occupation,  and  it  is  even  sufficient  to  set  out 
its  equivalent  in  value  in  other  real  estate  of  which  the 
widow  is  dowable. 

If  the  widow  is  entitled  to  dower  in  separate  tracts 
of  land,  the  common  rule  is  that  she  should  be  given 
one-third  of  each  tract,  rather  than  a  single  tract  equi- 
valent in  value  to  the  aggregate  of  her  dower  rights 
in  all  tracts.  And  in  the  case  of  several  tracts  conveyed 
by  her  husband,  without  her  joinder,  the  justice  of  the 
rule  that  dower  should  be  assigned  in  the  land  of  each 

310 


Estates  from  Marriage 

grantee,  and  not  in  the  land  of  one  alone,  is  apparent.  In 
the  case  of  lands  belonging  to  the  husband  at  the  time 
of  his  death,  however,  the  statute  quite  frequently  pro- 
vides for  the  assignment  of  her  whole  dower  out  of  one 
tract  rather  than  in  part  out  of  each  of  the  tracts,  and 
this  is  always  permissible  if  the  widow  and  the  heirs 
agree  thereto.  It  has  likewise  been  decided  that  dower 
should  be  assigned  entirely  out  of  a  tract  of  land  be- 
longing to  the  husband's  estate,  rather  than  partly  in 
lands  conveyed  by  him  with  a  warranty  of  title,  since, 
in  any  case,  the  husband's  estate  would  be  liable  under 
the  warranty  for  the  amount  of  the  dower. 

In  cases  where  the  widow  is  entitled  to  dower  in  the 
proceeds  of  the  lands  subject  to  dower,  as  where  a  mort- 
gage thereon  is  foreclosed,  or  a  partition  sale  is  made, 
she  is  generally  given  the  annual  interest  on  the  third 
part  of  such  proceeds  for  the  period  of  her  life.  The 
parties  may  agree  upon  a  gross  sum  to  be  paid  the  widow 
as  representing  her  dower  interest.  But,  in  the  absence 
of  agreement,  unless  expressly  authorized  by  statute,  a 
gross  sum  cannot  be  given  her  by  the  Court  in  lieu  of 
dower.  When  an  assignment  of  the  gross  sum  is  made 
by  the  Court,  in  accordance  with  an  agreement  of  the 
parties,  or  by  force  of  the  statute,  or  in  any  other  case, 
the  present  value  of  the  dower  interest  is  usually  com- 
puted, as  in  the  case  of  other  life  estates,  by  reference  to 
mortality  tables  indicating  the  expectation  of  life  at  the 
different  ages. 

The  amount  of  property  to  be  assigned  to  the  widow 
is  determined  by  its  productive  value,  she  being  entitled 
to  such  property  as  will  produce  one-third  of  the  rents 
and  profits  which  all  the  husband's  freehold  property 
would  produce. 


Practical  Real  Estate  Methods 

Since  dower  is  an  estate  only  for  the  life  of  the  widow, 
an  action  to  obtain  an  assignment  of  dower  necessarily 
abates  on  her  death.  And  as  there  can  be  no  recovery 
of  damages  at  law  unless  the  judgment  likewise  awards 
seisin  of  dower  lands,  the  widow's  death  defeats  such 
recovery,  in  the  absence  of  statutory  provision  to  the 
contrary,  but  does  not  prevent  recovery  of  the  rents 
and  profits,  in  equity,  provided  suit  for  dower  was 
brought  during  her  life. 

Assignment  of  dower,  in  accordance  with  the  judgment 
or  decree,  is  generally  made  by  the  sheriff  or  commis- 
sioners, the  practice  in  this  regard  varying  in  the  dif- 
ferent States,  but  the  action  of  such  officials  being  usually 
subject  to  the  approval  of  the  Courts. 

The  estate  of  dower,  after  assignment,  is  considered 
to  be  a  continuation  of  the  husband's  estate,  the  widow's 
title  relating  back  to  the  time  of  his  death,  and  conse- 
quently the  heir  is  not  regarded  as  having  ever  been 
seized  of  that  part  of  the  land  whereof  the  widow  was 
endowed.  The  widow  has  an  estate  for  life  in  the  prop- 
erty assigned,  with  all  the  rights  and  subject  to  all  the 
liabilities  of  other  life  tenants.  She  may  accordingly 
convey  or  incumber  her  estate.  She  is  bound  to  pay 
taxes  and  to  keep  down  interest  on  incumbrances,  and 
sfce  is  liable  for  the  commission  of  waste. 

On  the  termination  of  the  dower  estate  by  her  death 
the  person  who  has  a  reversion  after  the  dower  estate, 
whether  he  be  the  husband,  heir  or  devisee,  or  a  grantee 
of  the  land,  is  entitled  to  immediate  possession. 

The  Legislature  of  this  State  has  never  enacted  a 
"Homestead  Law,"  except  to  exempt  a  homestead  of 
the  value  of  $1,000  from  execution  sale. 


312 


THE  TENEMENT  HOUSE  LAW* 

LAWRENCE  VEILLER 

Principal  Requirements  of  the  Act  Governing  Erec- 
tion and  Management  of  Tenement  Property — Defini- 
tion of  a  Tenement — Penalties  for  Violations — Occu- 
pancy and  Use  of  Tenement  Houses — Alterations  in 
Existing  Buildings — New  Buildings 

THIS  act  affects  the  cities  of  New  York  and  Buffalo, 
and  provides  how  tenement  houses  hereafter 
erected  shall  be  constructed,  and  also  how  all 
tenement  houses  shall  be  maintained.  It  also  contains 
requirements  for  the  improvement  and  alteration  in  many 
ways  of  existing  tenement  houses.  A  tenement  house  is 
defined  to  be  any  building  occupied  or  intended  to  be 
occupied  by  three  families  or  more,  and  includes  build- 
ings popularly  known  as  apartment  houses  and  flats. 
The.  act  also  defines  a  yard,  court,  shaft,  public  hall, 
stair  hall,  basement,  cellar,  etc.  The  act  is  divided  into 
six  chapters:  Chapter  i,  definitions;  Chapter  2,  protec- 
tion from  fire;  Chapter  3,  light  and  ventilation;  Chapter 
4,  sanitary  provisions ;  Chapter  5,  remedies,  and  Chapter 
6,  general  provisions. 

Purchasers  ot  tenement  property  before  passing  title 
should  search  the  records  of  the  Tenement  House  De- 
partment to  ascertain  what  violations  of  the  Tenement 
House  Act  are  pending  against  such  property.  Such 

*  Reprinted  from  the  Standard  Real  Estate  Annual  through 
the  courtesy  of  the  Editors  and  with  the  permission  of  the 
Author. 

313 


Practical  Real  Estate  Methods 

searches  will  be  made  by  the  Department  free  of 
charge  for  all  persons  having  a  legitimate  interest. 

Before  any  new  tenement  house  can  be  lawfully  occu- 
pied the  law  requires  that  the  builder  shall  receive  a 
certificate  from  the  Tenement  House  Department  to  the 
effect  that  the  building  has  been  erected  in  accordance 
with  the  proyisions  of  the  Tenement  House  law.  Real 
estate  operators  should  refuse  to  make  loans  unless  such 
certificate  is  produced.  If  a  tenement  house  is  occupied 
without  such  certificate,  it  is  provided  that  during  such 
unlawful  occupation  any  note  secured  by  a  bond  or 
mortgage  upon  the  building  or  the  lot  upon  which  it 
stands  may  be  declared  due  at  the  option  of  the  mort- 
gagee, and  that  no  rent  shall  be  recoverable  by  the 
owner  or  lessee  of  the  premises  for  this  period,  nor  may 
an  action  or  special  proceeding  be  maintained  therefor,  or 
for  possession  of  the  premises  or  for  non-payment  of 
rent.  And  it  is  further  provided  that  the  house  shall 
be  deemed  unfit  for  human  habitation,  and  the  Tene- 
ment House  Department  shall  cause  it  to  be  vacated 
accordingly. 

Enforcement  of  the  Act  —  In  New  York  City  the 
Tenement  House  Law  is  enforced  by  a  separate  branch 
of  the  city  government,  vis.,  the  Tenement  House  De- 
partment, which  was  created  on  January  ist,  1902.  The 
head  of  the  Department  is  the  Tenement  House  Com- 
missioner. The  main  office  is  at  44  East  23d  Street, 
corner  of  Fourth  Avenue,  4th  floor.  Branch  offices  are 
located  as  follows :  In  Brooklyn,  44  Court  Street,  Temple 
Court  Building;  in  the  Bronx,  2804-2808  Third  Avenue. 
The  Brooklyn  office  of  the  Department  has  jurisdiction 
over  tenement  houses  in  the  boroughs  of  Queens  and 
Richmond,  as  well  as  Brooklyn. 

314 


Tenement  House  Law 

The  provisions  of  the  Tenement  House  Act  in  regard 
to  new  buildings  are  enforced  entirely  by  the  Tenement 
House  Department,  and  the  Bureau  of  Buildings  of  each 
borough  has  jurisdiction  only  over  the  provisions  of 
the  Building  Code  so  far  as  they  may  relate  to  tenement 
houses.  This  includes  plumbing  in  new  buildings.  The 
duties  of  sanitary  inspection  formerly  performed  by  the 
Department  of  Health  have  been  transferred  to  the  Tene- 
ment House  Department,  except  that  the  Department  of 
Health  retains  its  general  work  of  looking  after  con- 
tagious disease,  disinfection  of  premises,  etc.  Plans  for 
all  new  tenement  houses  must  be  filed  with  the  Tene- 
ment House  Department  and  approved  by  it  before  any 
permit  for  the  erection  of  such  building  can  be  issued 
by  the  Bureau  of  Buildings. 

Registry  of  Owners'  Names  —  Every  owner  of  a 
tenement  house  is  required  to  file  in  the  Tenement  House 
Department  the  street  number  and  address  of  the  house, 
the  name  and  address  of  the  owner,  the  number  of 
apartments  in  the  house,  the  number  of  rooms  in  each 
apartment,  the  number  of  families  occupying  the  apart- 
ments. In  case  of  a  transfer  of  any  tenement  house, 
it  becomes  the  duty  of  the  grantor  or  grantee  to  file  in 
the  Tenement  House  Department  a  notice  of  the  transfer, 
stating  the  name  and  address  of  the  new  owner  within 
thirty  days  after  the  transfer.  The  penalty  for  failure 
to  comply  with  this  section  is  $50.  It  is  further  pro- 
vided that  every  owner  may,  for  his  own  convenience, 
file  in  the  Tenement  House  Department  a  notice  con- 
taining the  name  and  address  of  an  agent  of  the  house, 
for  the  purpose  of  receiving  service  of  process. 

Penalties  for  Violation  of  the  Tenement  House 
Act — Every  person  who  shall  violate  or  assist  in  the 

315 


Practical  Real  Estate  Methods 

violation  of  any  of  the  provisions  of  the  act  shall  be 
deemed  guilty  of  a  misdemeanor,  punishable  by  im- 
prisonment for  ten  days  for  each  and  every  day  that 
the  violation  continues,  or  by  a  fine  of  not  less  than 
$10  nor  more  than  $100;  if  the  violation  be  wilful,  by 
a  fine  of  $250,  and  in  every  case  $10  for  each  day  after 
the  first  that  the  violation  shall  continue,  or  by  both 
such  fine  and  imprisonment,  in  the  discretion  of  the 
court.  The  penalty  for  the  obstruction  of  fire  escapes 
by  an  occupant  of  a  tenement  house  shall  be  a  fine  of 
$10,  which  the  nearest  police  magistrate  shall  have 
jurisdiction  to  impose. 

Service  of  Notices  and  Orders — The  posting  of  a 
copy  of  a  notice  or  order  in  a  conspicuous  place  in  a 
tenement  house,  together  with  the  mailing  of  a  copy 
on  the  same  day  to  each  person  whose  name  has  been 
filed  with  the  Tenement  House  Department,  shall  be 
deemed  sufficient  service,  and  summons  may  be  served 
in  the  same  way. 

MAINTENANCE,  OCCUPANCY  AND  USE  OF 
TENEMENT  HOUSES 

Combustible  Materials,  etc. — No  tenement  house,  nor 
any  part  of  it  may  be  used  as  a  place  of  storage  for 
any  combustible  article,  except  with  a  written  permit 
from  the  Fire  Department ;  nor  shall  any  tenement  house 
nor  any  part  thereof  be  used  under  any  circumstances 
for  the  storage  of  any  article  dangerous  to  life  or  health ; 
nor  for  the  storage  of  hay,  feed,  straw  or  cotton;  nor 
for  the  storage  or  handling  of  rags.  No  bakery  and 
no  fat  boiling  may  be  maintained  in  any  tenement  house 
that  is  not  fireproof  throughout,  unless  the  ceiling  and 

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side  walls  of  the  bakery  or  place  where  the  fat  boiling 
is  done  are  made  safe  by  fireproof  material  around  the 
same.  Transoms  or  windows  opening  into  the  halls  from 
any  portion  of  the  building  where  paint,  oil,  spirituous 
liquors  or  drugs  are  kept  for  the  purpose  of  sale  or 
otherwise  must  be  glazed  with  wireglass  or  closed  up 
as  solidly  as  the  rest  of  the  wall,  and  all  doors  leading 
into  the  hall  from  that  part  of  the  tenement  house  must 
be  made  fireproof. 

Basements  and  Cellars — No  room  in  the  basement 
or  cellar  of  a  tenement  house  may  be  occupied 
for  living  purposes  without  a  written  permit  from 
the  Tenement  House  Department;  nor  shall  any 
such  room  be  occupied  unless  it  is  at  least  seven 
feet  high  in  every  part,  from  the  floor  to  the  ceiling; 
nor  unless  the  ceiling  of  the  room  is  at  least  two 
feet  above  the  curb  level;  nor  unless  there  is  the  use 
of  a  water  closet  for  such  room;  nor  unless  there  is 
outside  of,  and  adjoining  the  room,  and  extending  along 
its  entire  frontage,  an  area  of  at  least  2  feet  6  inches 
in  width  at  every  part,  the  area  to  be  properly  drained, 
and  the  room  to  have  a  window  or  windows  at  least 
nine  square  feet  in  area  opening  to  the  outer  air,  and 
one-half  of  the  window  must  be  made  to  open  readily. 

Cellar  Walls,  Ceilings,  etc.— The  cellar  walls  and 
ceilings  of  every  tenement  house  must  be  whitewashed 
or  painted  a  light  color  by  the  owner  at  least  once  a 
year.  Roofs  of  tenement  houses  must  be  kept  in  good 
repair  so  as  not  to  leak.  Every  tenement  house  must 
have  water  furnished  in  sufficient  quantity  at  one  or 
more  places  on  each  floor,  and  the  owner  must  supply 
proper  and  suitable  tanks,  pumps  or  other  appliances 
to  receive  and  distribute  an  adequate  supply  of  water 

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at  each  floor  at  all  times  of  the  day  and  night  through 
the  entire  year. 

Every  tenement  house  must  be  kept  clean  and  free 
from  any  accumulation  of  dirt,  filth  or  garbage,  and  the 
owner  must  provide  proper  and  suitable  receptacles  for 
ashes,  garbage,  refuse  and  other  material.  No  wall 
paper  may  be  placed  upon  the  wall  of  any  tenement 
house  unless  all  wall  paper  shall  have  been  removed 
therefrom  and  the  wall  and  ceiling  thoroughly  cleansed. 
The  walls  of  all  areas,  courts  and  shafts,  unless  built 
of  a  light-colored  brick  or  stone,  must  be  thoroughly 
whitewashed  by  the  owner  at  least  once  in  three  years, 
or  painted  a  light  color  at  least  once  in  five  years.  The 
keeping  of  certain  animals  on  premises  is  prohibited, 
and  no  tenement  may  be  used  for  a  lodging  house  or 
stable. 

Janitor — Wherever  there  are  more  than  eight  families 
in  a  tenement  house  and  the  owner  does  not  reside  on 
the  premises,  there  must  be  a  janitor  or  housekeeper 
residing  there,  provided  the  Tenement  House  Depart- 
ment so  requires  it.  No  room  in  a  tenement  house  shall 
be  so  overcrowded  that  there  shall  be  less  than  400 
cubic  feet  of  air  for  each  adult  and  200  cubic  feet  for 
each  child  under  twelve. 

Public  Halls  —  Lighting  at  Night  —  It  is  required 
that  a  light  shall  be  kept  burning  by  the  owner  in  the 
public  hallway  near  the  stairs  on  the  entrance  floor,  and 
on  the  second  floor  above  the  entrance  floor  every  night 
from  sunset  to  sunrise  throughout  the  year,  and  upon 
all  the  other  floors  of  the  house  from  sunset  until  10 
o'clock. 

Fire  Escapes  and  Egress  —  Every  tenement  house 
must  have  a  fire  escape  directly  accessible  to  each  apart- 

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ment.  Every  tenement  house  must  have  in  the  roof  a 
bulkhead  or  scuttle,  with  stationary  ladder  or  stairs 
leading  thereto,  and  kept  free  from  encumbrance.  No 
scuttle  and  no  bulkhead  door  shall  be  locked  with  a  key, 
but  may  be  fastened  on  the  inside  with  movable  bolts 
or  hooks.  All  stairways  must  be  provided  with  proper 
banisters  and  railings  and  kept  in  good  repair. 

Toilet  Accommodations — There  must  be  one  water 
closet  for  every  two  families  or  apartments  in  each  tene- 
ment house. 

Prostitution — A  woman  who  knowingly  resides  in  or 
commits  prostitution  in  a  house  for  prostitution  or  as- 
signation in  a  tenement  house,  or  solicits  any  man  or 
boy  to  enter  therein  for  purposes  of  prostitution  is  deemed 
a  vagrant,  and  upon  conviction  shall  be  committed  to 
the  county  jail  for  a  term  not  exceeding  six  months. 
A  tenement  house,  if  used  for  the  purpose  of  a  house 
of  prostitution  or  assignation  with  the  permission  of 
its  owner  or  agent,  shall  be  subject  to  a  penalty  of  $1,000, 
and  the  penalty  shall  be  a  lien  upon  the  house  and  the 
lot  upon  which  the  house  is  situated.  A  tenement  house 
shall  be  deemed  to  have  been  used  for  this  purpose  with 
the  permission  of  the  owner  and  lessee  if  summary 
proceedings  for  the  removal  of  the  tenants  complained 
of  shall  not  have  been  commenced  within  five  days  after 
notice  of  such  unlawful  use  from  the  Tenement  House 
Department.  In  a  prosecution  against  the  owner  or 
agent  of  a  tenement  house  under  section  322  of  the 
Penal  Code  the  general  reputation  of  the  premises  in 
the  neighborhood  shall  be  competent  evidence,  but  shall 
not  be  sufficient  to  support  a  judgment  without  cor- 
roborative evidence,  and  it  shall  be  presumed  that  the 
use  of  the  premises  was  with  the  knowledge  of  the 

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Practical  Real  Estate  Methods 

owner  or  lessee,  provided  such  presumption  may  be 
rebutted  by  evidence.  Whenever  the  liens  upon  tene- 
ment property  established  by  judgment  amount  to  $1,000 
or  over,  the  Tenement  House  Department  shall  appoint 
a  receiver  of  the  rents  and  profits  of  such  property. 


ALTERATIONS  AND  IMPROVEMENTS  RE- 
QUIRED FOR  EXISTING  BUILDINGS 

Interior  Dark  Rooms,  Lighting  and  Ventilation  of— -. 
No  room  in  a  now  existing  tenement  house  may  be  oc- 
cupied for  living  purposes  unless  it  has  a  window  upon 
the  street  or  upon  a  yard  not  less  than  four  feet  deep, 
or  upon  a  court  or  shaft  not  less  than  twenty-five  square 
feet  in  area,  open  to  the  sky  without  roof  or  skylight, 
or  unless  it  has  a  sash  window  opening  into  an  adjoining 
room  in  the  same  apartment,  the  sash  window  between 
it  and  the  outer  room  to  contain  fifteen  square  feet  of 
glazed  surface  and  to  be  at  least  3  feet  by  5  feet,  and 
one-half  made  to  open  readily. 

Privy  Vaults,  School  Sinks,  etc. — All  school  sinKS 
and  privy  vaults  in  the  yards  of  now  existing  tenement 
houses  must  be  completely  removed  and  the  places  where 
they  were  located  be  thoroughly  disinfected  under  direc- 
tion of  the  Tenement  House  Department,  and  instead 
of  school  sinks  or  privy  vaults  proper  water  closets  must 
be  provided.  There  must  be  one  water  closet  for  every 
two  families  or  apartments  in  the  house.  Such  water 
closets  may  be  located  on  each  floor  in  the  building  or 
otherwise  in  the  building,  or,  if  desired,  may  be  placed 
in  the  yard,  provided  the  bowls,  traps,  pipes,  and  flush 
tanks  can  be  properly  protected  from  frost.  If  placed 
in  the  yard,  long  hopper  closets  may  be  used,  but  such 

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Tenement  House  Law 

closets  must  be  provided  with  individual  traps  and  prop- 
erly connected  flush  tanks. 

Water  Closets  and  Public  Sinks — In  all  tenement 
houses  the  woodwork  enclosing  water  closets  and  all 
public  sinks  located  in  the  public  halls  or  stairs  must 
be  removed  from  the  front  of  the  closet  or  sink  and 
the  space  underneath  left  open  and  maintained  in  good 
order  and  kept  well  painted  with  white  paint. 

Public  Halls,  Lighting  of  —  In  every  now  existing 
tenement  house  four  stories  high  or  over,  wherever  the 
public  hall  on  any  floor  is  not  light  enough  for  a  person 
to  read  without  artificial  light  in  the  daytime,  the  wooden 
panels  in  the  doors  located  at  the  ends  of  the  public  hall 
and  opening  into  rooms  must  be  removed  and  ground 
glass  or  wire  glass  panels  of  an  area  not  less  than  four 
square  feet  for  each  door  substituted,  or  the  halls  may 
be  lighted  by  a  window  at  the  end  of  the  hall.  This 
does  not  apply  to  flats  where  there  are  private  halls, 
but  only  to  tenement  houses  where  the  public  halls  com- 
municate directly  with  the  rooms.  In  addition  every 
public  hall  must  have  directly  over  the  stairwell  a  ven- 
tilating skylight  with  ridge  ventilators  and  fixed  louvres, 
the  glazed  surface  of  the  skylight  to  be  not  less  than 
twenty-five  square  feet  in  area. 

NEW  BUILDINGS 

Fireproof  Tenements  —  Tenement  houses  hereafter 
erected  must  not  exceed  six  stories  in  height  above  the 
curb  level,  unless  constructed  fireproof.  A  basement  is 
deemed  a  story,  and  a  cellar  is  also  if  the  cellar  ceiling 
is  more  than  two  feet  above  curb  level. 

Fire  Escapes  —  Fireproof  tenement  houses  are  not 

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Practical  Real  Estate  Methods 

required  to  have  fire  escapes  under  the  act.  All  non- 
fireproof  tenement  houses  hereafter  erected  must  be  pro- 
vided with  fire  escapes  and  there  must  be  one  fire  escape 
opening  directly  from  at  least  one  room  in  each  apart- 
ment. Vertical  ladders  are  prohibited,  and  stairs  at  an 
angle  of  not  more  than  sixty  degrees  are  required.  The 
law  describes  in  detail  how  all  fire  escapes  shall  be  con- 
structed. In  tenement  houses  less  than  four  stories  in 
height,  and  which  also  do  not  contain  accommodations 
for  more  than  four  families,  iron,  steel  or  wire  fire 
escapes,  of  a  pattern  to  be  approved  by  the  Tenement 
House  Department,  may  be  used,  instead  of  iron  bal- 
conies and  stairs. 

Stairways — In  non-fireproof  tenement  houses  hereafter 
erected  there  is  to  be  one  flight  of  stairs  for  every  26 
apartments,  but  if  the  house  contains  not  more  than  36 
apartments  the  halls  and  stairs  may  each  be  widened 
one-half  in  lieu  of  another  flight  of  stairs.  In  fireproof 
tenement  houses  hereafter  erected  there  must  be  one 
flight  of  stairs  for  each  36  apartments,  but  if  there  are 
not  more  than  48  apartments  in  the  house,  the  halls  and 
stairs  may  be  widened  one-half  in  lieu  of  the  second 
stairway.  All  stairs  must  have  a  rise  of  not  more  than 
seven  and  a  half  inches,  with  treads  not  less  than 
ten  inches  in  width  and  three  feet  in  length.  Winders 
are  permitted  under  such  conditions.  All  stairs  must 
be  fireproof  construction ;  risers,  strings  and  banisters 
to  be  metal  or  stone;  treads  to  be  of  metal  or  stone, 
or  of  hardwood  not  less  than  two  inches  thick. 

Public  Halls — No  public  hall  can  be  less  than  three 
feet  wide  and  the  stair  halls  in  all  tenement  houses  here- 
after erected  are  to  be  constructed  fireproof  throughout; 
floors  to  be  of  iron  or  steel  beams  and  fireproof  flooring; 

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Tenement  House  Law 

no  wooden  floorings  or  sleepers  to  be  permitted.  Stair 
and  entrance  halls  must  be  enclosed  on  all  sides  with 
brick  walls,  and  in  non-fireproof  tenement  houses  here- 
after erected  the  doors  opening  from  stair  halls  must 
be  fireproof  and  self-closing.  Transoms  or  other  open- 
ings from  stair  halls  to  other  parts  of  the  house  are 
prohibited.  The  stair  halls  are  to  be  shut  off  from  all 
non-fireproof  portions  of  the  public  halls  and  from  all 
other  non-fireproof  parts  of  the  building  on  each  story 
by  self-closing  fireproof  doors.  Windows  of  stair  halls 
opening  on  courts  must  be  wire-glass  and  fire-proof 
frames.  Entrance  halls  must  be  at  least  three  feet  six 
inches  wide,  access  to  be  had  from  street  to  yard. 
New  buildings  not  over  three  stories  and  cellar  in  height 
are  exempted  from  the  fireproofing  requirements  of 
these  provisions. 

Beams — In  all  tenement  houses  hereafter  erected  five 
stories  or  more  in  height,  not  including  the  cellar,  the 
first  floor  above  the  cellar  is  to  be  constructed  fireproof, 
with  iron  or  steel  beams  and  fireproof  flooring.  In  non- 
fireproof  tenement  houses  hereafter  erected  less  than  five 
stories  in  height,  when  the  first  tier  is  not  constructed 
fireproof,  the  cellar  ceiling  is  required  to  be  lathed  with 
wire  or  metal  lath. 

Cellar  Stairs — In  non-fireproof  tenement  houses  ex- 
ceeding three  stories  in  height  inside  stairs  to  the  cellar 
are  prohibited;  and  where  outside  stairs  to  the  cellar 
are  enclosed,  they  are  to  be  constructed  fireproof.  In 
fireproof  buildings  the  cellar  stairs  may  be  inside  the 
building,  provided  they  are  not  located  underneath  the 
stairs  leading  to  the  upper  stories,  and  that  the  portions 
of  the  cellar  into  which  the  stairs  lead  are  entirely  shut 
off  by  fireproof  walls,  with  fireproof  doors  to  all  open- 

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Practical  Real  Estate  Methods 

ings  in  such  walls,  from  those  portions  of  the  cellar  used 
for  the  storage  of  fuel  or  in  which  heating  appliances, 
boilers  or  machinery  are  located.  In  non-fireproof  tene- 
ment houses  hereafter  erected,  closets  under  the  first- 
story  staircase  are  prohibited,  and  the  space  is  required 
to  be  left  open.  In  every  tenement  house  hereafter 
erected  an  entrance  to  the  cellar  from  the  outside  of 
the  building  is  required,  and  where  the  first  tier  of  beams 
is  not  fireproof  and  the  building  exceeds  three  stories 
in  height,  all  wood  bins  or  receptacles  for  fuel  or  storage 
in  the  cellar  must  be  constructed  fireproof. 

Frame  Tenement  Houses — Outside  of  the  fire  limits 
wooden  tenement  houses  may  be  constructed,  but  must 
not  exceed  two  stories  in  height,  not  including  the  cellar, 
nor  must  they  provide  accommodations  for  nor  be 
occupied  by  more  than  four  families  nor.  have  more 
than  two  families  on  a  floor.  Such  houses  are 
exempted  from  complying  with  practically  all  of 
the  provisions  of  the  act  in  regard  to  protection 
from  fire.  No  wooden  building  may  hereafter  be  built 
or  placed  upon  the  same  lot  with  a  tenement  house 
within  the  fire  limits. 

Percentage  of  Lot  Occupied  —  In  tenement  houses 
hereafter  erected,  buildings  on  corner  lots  may  not  occupy 
more  than  90  per  cent.  On  interior  lots  only  70  per 
cent  of  the  lot  may  be  occupied.  In  certain  cases  the 
measurements  may  be  taken  at  the  levels  of  the  second 
tier  of  beams. 

Limitation  of  Height — No  tenement  house  hereafter 
erected  shall  exceed  in  height  the  width  of  the  widest 
street  upon  which  it  stands  by  more  than  one-half.  This 
limits  new  buildings  on  streets  60  feet  wide  to  90  feet 
high,  and  on  avenues  100  feet  wide  to  150  feet  in  height. 

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Tenement  House  Law 

This  limitation  is  entirely  irrespective  of  any  provision 
regarding  fireproofing. 

Yards — Yards  of  tenement  houses  hereafter  erected  on 
corner  lots  must  be  not  less  than  ten  feet  deep,  and 
extend  across  the  full  width  of  the  lot.  On  interior 
lots  the  depth  of  the  yard  is  to  be  proportioned  to  the 
height  of  the  building.  For  houses  sixty  feet  high  the 
yard  must  not  be  less  than  twelve  feet  deep,  and  for 
every  twelve  feet  or  fraction  thereof  beyond  sixty  feet 
in  height  the  yard  must  be  increased  one  foot  in  depth. 
Similarly  for  every  twelve  feet  in  height  less  than  sixty 
feet,  the  yard  may  be  decreased  one  foot,  but  it  shall 
in  no  case  be  less  than  ten  feet  deep.  On  corner  lots, 
where  it  is  intended  to  have  stores  on  the  ground  floor, 
the  yard  may  start  from  the  second  tier  of  beams.  Where 
a  tenement  house  runs  through  from  one  street  to  an- 
other street,  and  the  lot  on  which  the  house  is  situated 
is  less  than  seventy  feet  in  depth,  no  yard  space  is  re- 
quired. Where  the  lot  is  over  seventy  feet  deep,  and  not 
over  one  hundred  feet,  the  yard  need  only  be  twelve  feet 
deep  for  a  building  sixty  feet  high,  and  shall  be  left 
through  the  center  of  the  lot.  Where  lots  that  are  over 
one  hundred  feet  in  depth  run  through  from  street  to 
street,  the  yard  must  be  left  through  the  center  of  the  lot, 
and  must  be  twenty-four  feet  deep,  and  must  increase 
with  the  increased  height  of  the  building. 

Courts — The  act  distinguishes  between  outer  and  inner 
courts,  an  outer  court  being  one  with  one  entire  side 
open  to  the  street  or  yard,  and  an  inner  court  being  one 
enclosed  on  all  four  sides  or  enclosed  on  three  sides  and 
bounded  on  the  fourth  side  by  the  lot  line  of  the  building. 
All  courts  must  be  open  at  every  point  to  the  sky  un- 
obstructed. Outer  courts,  where  situated  on  the  lot  line, 

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Practical  Real  Estate  Methods 

must  be  at  least  six  feet  wide  in  every  part  for  buildings 
sixty  feet  in  height,  and  for  every  twelve  feet  of  increase 
in  the  height  of  the  building  the  width  of  the  court  must 
increase  six  inches  throughout  the  entire  height  of  the 
court,  and  may  similarly  decrease  six  inches  in  width  for 
every  twelve  feet  in  height  of  the  building  less  than  sixty 
feet.  Outer  courts  between  wings  of  the  same  building, 
or  between  different  buildings  on  the  same  lot,  must  be 
twelve  feet  wide  in  every  part,  and  must  increase  one 
foot  in  width  for  every  twelve  feet  of  increase  in  the 
height  of  the  building  over  sixty  feet,  and  may  similarly 
decrease  one  foot  in  width  for  every  twelve  feet  of 
height  less  than  sixty  feet.  An  exception  is  made  to 
this  rule,  however,  by  providing  that  where  an  outer 
court  is  less  in  depth  than  the  minimum  width  prescribed 
by  the  act,  its  width  may  be  equal  to  its  depth;  for  ex- 
ample, if  an  outer  court  between  wings  is  only  eight 
feet  deep,  it  may  be  only  eight  feet  wide  instead  of 
twelve  feet  wide,  etc.  Similar  exceptions  are  made  for 
offsets  in  recesses  in  such  courts.  Inner  courts  when 
situated  on  the  lot  line  are  required  to  be  twelve  feet 
wide  in  every  part  and  to  increase  six  inches  in  width 
for  every  twelve  feet  in  height  beyond  sixty  feet,  and 
may  decrease  similarly  in  width  for  every  such  decrease 
in  height.  Inner  courts  not  on  the  line,  but  enclosed 
on  all  four  sides,  must  not  be  less  than  twenty-four  feet 
in  each  direction  and  must  increase  one  foot  in  each 
direction  for  every  twelve  feet  of  increase  in  the  height 
of  the  building  beyond  sixty  feet,  and  may  decrease  one 
foot  in  each  direction  for  every  twelve  feet  of  decrease 
in  the  height  of  the  building  below  sixty  feet.  Similar 
exceptions  to  those  provided  for  outer  courts  are  pro- 
vided for,  but  no  windows  except  windows  of  water 

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Tenement  House  Law 

closets,  bathrooms  or  halls  shall  open  upon  any  offset 
or  recess  less  than  six  feet  in  width.  Every  inner  court 
must  be  provided  with  one  or  more  horizontal  intakes 
or  ducts  at  the  bottom  to  provide  a  circulation  of  air, 
and  such  intakes  or  ducts  may  not  be  less  in  total 
area  than  4  per  centum  of  the  area  of  the  inner  court, 
and  a  minimum  size  of  five  square  feet  for  each  intake 
is  prescribed.  These  intakes  must  always  communicate 
directly  with  the  street  JOT  yard,  and  may  consist  either 
of  a  metal  duct  or  pipe,  or  may  be  an  open  passageway 
provided  with  iron  grilles  or  grates  at  each  end.  In 
new  buildings  not  over  three  stories  high  and  arranged 
for  not  more  than  two  families  on  a  floor  or  six  families 
in  all,  outer  courts  are  permitted  four  feet  wide,  if  not 
over  twenty-four  feet  long,  and  inner  courts  are  per- 
mitted to  be  eight  feet  wide  and  fourteen  feet  long. 

Rear  Tenements — Rear  tenements  are  prohibited  on 
any  lot  less  than  fifty-one  feet  in  width,  and  whenever 
any  building  is  hereafter  placed  on  the  same  lot  with 
a  tenement  house  the  space  between  the  buildings  is 
to  be  regulated  in  a  manner  similar  to  the  rules  laid 
down  for  the  size  of  inner  courts. 

Rooms — Alcove  rooms  are  prohibited.  No  room  can 
be  subdivided  so  as  to  make  a  dark  portion  of  the  room. 
In  every  tenement  house  hereafter  erected  every  room 
except  water  closet  compartments  and  bathrooms  must 
have  at  least  one  window  opening  directly  upon  the  street 
or  upon  the  yard  or  on  a  court  of  the  minimum 
size  prescribed  by  the  act.  Water  closet  compart- 
ments and  bathrooms  may  have  windows  opening 
on  vent  shafts  which  do  not  light  or  ventilate  other 
rooms  or  halls.  Such  vent  shafts  must  be  at  least 
twenty  square  feet  in  area  and  not  less  than  four 

327 


Practical  Real  Estate  Methods 

feet  in  their  least  dimension,  and  when  the  building 
is  more  than  sixty  feet  in  height,  must  increase  in  area 
three  square  feet  for  every  twelve  feet  of  increase  in 
the  height  of  the  building.  Such  shafts  may  not  be 
roofed  over,  and  must  be  provided  with  a  proper  intake 
of  air  at  the  bottom.  In  all  rooms  excepting  water 
closets  and  bathrooms  the  total  window  area  in  each 
room  must  be  at  least  one-tenth  of  the  superficial  area 
of  the  room,  and  no  window  must  be  less  than  twelve 
square  feet  in  area  between  the  stop  beads;  in  water 
closets  and  bathrooms,  however,  the  windows  may  not 
be  less  than  three  square  feet  in  area  nor  less  than  one 
foot  in  width. 

Size  of  Rooms — In  each  apartment  there  must  be 
at  least  one  room  containing  at  least  120  square  feet 
of  floor  area,  and  all  other  rooms  shall  contain  at  least 
seventy  square  feet  of  floor  area.  This  does  not  apply, 
however,  to  water  closet  compartments  and  bathrooms. 
All  rooms  must  be  not  less  than  nine  feet  high  from 
the  floor  to  the  ceiling. 

Public  Halls,  Light  and  Ventilation  of — In  tenement 
houses  over  four  stories  high  or  that  are  occupied  by 
more  than  two  families  on  any  floor,  every  public  hall 
must  have  at  least  one  window  opening  directly  upon 
the  street,  yard  or  court.  If  the  window  is  not  at  the 
end  of  the  hall  with  the  plane  at  right  angle  to  the  axis 
of  the  hall,  then  there  must  be  one  window  for  every 
twenty  feet  in  length,  or  fraction  thereof,  of  the  hall. 
Where  there  are  recesses  in  such  halls  and  the  length 
of  the  recess  exceeds  twice  its  width,  additional  windows 
must  be  provided  for  such  recesses.  If  any  part  of  a 
public  hall  is  shut  off  from  any  other  part  of  the  hall 
by  a  door  or  doors,  it  is  considered  a  separate  hall,  and 

328 


Tenement  House  Law 

must  be  lighted  and  ventilated  separately.  At  least  one 
of  the  windows  in  the  public  hall  must  be  not  less  than 
two  feet  six  inches  wide  and  five  feet  high.  In  stair  halls 
the  aggregate  area  of  windows  should  not  be  less  than 
eighteen  square  feet,  and  there  must  be  provided  for 
each  story  at  least  one  window  which  shall  not  be  less 
than  two  and  a  half  feet  wide  and  five  feet  high.  In 
addition  to  windows  there  must  be  in  every  hall  directly 
over  the  stairwell  in  the  roof  a  ventilating  skylight  with 
ridge  ventilators  and  fixed  louvres,  with  an  area  of  not 
less  than  twenty  square  feet. 

Privacy — In  every  apartment  of  three  or  more  rooms 
access  to  every  living  room  and  bedroom  and  to  at  least 
one  water  closet  compartment  must  be  had  without  pass- 
ing through  any  bedroom. 

Basements  and  Cellars — In  new  tenement  houses  base- 
ments may  be  occupied  for  living  purposes  only  when 
at  least  nine  feet  high  in  every  part  from  the  floor  to 
the  ceiling,  when  the  ceiling  of  the  room  is  at  least  four 
feet  six  inches  above  the  curb-level,  and  there  is  a  sep- 
arate water  closet  provided  for  the  use  of  the  room. 
Such  rooms  must  have  a  window  opening  directly  upon 
the  street  or  upon  the  yard  or  on  a  court  of  the  minimum 
size  prescribed  in  the  act,  and  the  total  window  area 
of  the  room  must  be  at  least  one-eighth  of  the  super- 
ficial area  of  the  room.  The  walls  surrounding  the  room 
must  be  dampproof,  and  the  floor  of  the  room  must  be 
both  waterproof  and  dampproof.  In  all  tenement  houses 
hereafter  erected,  whether  the  basement  is  to  be  occu- 
pied for  living  purposes  or  not,  the  walls  below  the  ground 
level  and  all  cellar  floors  must  be  dampproof  and  water 
proof.  In  addition  to  the  above,  janitors'  apartments  are 
permitted  in  the  cellars  of  new  buildings,  provided  they 

329 


Practical  Real  Estate  Methods 

do  not  contain  more  than  five  rooms  and  bath,  are  located 
in  the  rear  of  the  building,  and  are  entirely  above  the 
level  of  the  adjoining  yard  and  courts  and  also  the 
ceiling  is  at  least  two  feet  above  the  curb-level  of  the 
street  in  front  of  the  building. 

Drainage  of  Shafts,  Courts,  Areas  and  Yards — All 
shafts,  courts,  areas  and  yards  must  be  concreted,  graded, 
drained  and  properly  connected  with  the  street  sewer. 

Water  Closet  Accommodations  —  In  all  tenement 
houses  hereafter  erected  there  must  be  a  separate  water 
closet  for  each  apartment,  and  the  water  closet  must  be 
located  within  the  apartment.  The  floor  of  the  water 
closet  compartment  must  be  constructed  waterproof  with 
a  six-inch  base  around  the  same.  Drip  trays  are  pro- 
hibited, as  is  the  enclosing  of  water  closet  fixtures  with 
any  woodwork ;  water  closets  and  plumbing  must  be  con- 
structed in  accordance  with  the  plumbing  code  of  the  city. 

Miscellaneous  Provisions — In  every  tenement  house 
hereafter  erected  there  must  be  running  water  in  each 
apartment.  The  floor  of  the  cellar  must  be  made  water- 
tight, and  the  ceiling  of  the  cellar  must  be  plastered. 
At  the  bottom  of  every  shaft  and  in  all  courts  there 
must  be  a  self-closing  fireproof  door,  giving  access  to 
such  shaft  or  court. 


CHARTER   PROVISIONS    RELATIVE   TO 
TENEMENT  HOUSES 

In  addition  to  the  above  provisions  contained  in  the 
Tenement  House  Act,  detailed  provisions  with  regard 
to  the  powers,  duties  and  organization  of  the  Tenement 
House  Department  will  be  found  in  the  Greater  New 
York  Charter,  Chapter  XlXa,  Sections  1326  to  1344?. 

330 


WATER-FRONT  PROPERTY 

McDOUGALL  HAWKES 

Appraisals  and  Expert  Testimony — Condemnation 
Proceedings — Ownership  in  the  Various  Boroughs — 
Leases — Purchases  and  Sales — Land  Under  Water- 
Grants — Improvements — Management — Records 

IT  would  be  impossible,  in  the  short  space  of  a  chap- 
ter, to  treat,  even  in  the  most  cursory  manner,  the 
many  matters  connected  with  our  water-front  of 
which  knowledge  would  prove  of  service.  The  subjects 
which  have  been  selected  are  confined  entirely  to  those 
of  immediate  practical  value.  Nor  is  it  even  possible 
to  go  into  many  of  the  refinements  of  the  subjects,  which 
must  be  carefully  taken  into  account  in  estimating  on 
values,  and  in  determining  the  most  advantageous  course 
for  clients  to  pursue.  To  any  one  making  a  specialty 
of  water-front  property,  in  forming  opinions  of  values 
by  deduction  from  existing  and  former  conditions,  not 
only  will  general  knowledge  of  water-front  engineering 
and  law  prove  of  great  assistance,  but  special  knowledge 
also  of  city  finance  and  administration,  and  of  the  policy 
which  the  city  has  pursued  in  water-front  matters  in 
Manhattan  will  be  of  great  benefit.  If  you  should  pro- 
ceed to  a  study  of  city  finance,  you  will  find  one  of  its 
most  important  divisions,  the  city's  sinking  funds  (which 
have  for  some  forty  years  borne  a  close  relation  to  the 
development  of  the  Manhattan  water-front)  very  in- 
tricate; in  short,  the  difficulty  of  obtaining  knowledge 
of  water-front  matters  is  of  itself  evidence  of  their 

331 


Practical  Real  Estate  Methods 

frequently  highly  technical  character.  Very  careful 
study,  before  arriving  at  conclusions  in  water-front  ques- 
tions, cannot  be  too  strongly  urged. 


Character  of  Water-front  Property 

In  a  general  way,  water-front  property  refers  to  real 
estate,  improved,  or  unimproved,  bordering  upon  nav- 
igable waters  and  upon  which  are  lines  of  high  and  low 
water  mark,  indicating  the  difference  of  the  level  of  the 
water  at  the  ebb  and  flow  of  the  tide,  which  varies  in 
different  seasons  and  according  to  the  direction  of  the 
wind  and  for  other  reasons.  When  high  water  mark 
or  low  wrater  mark  are  spoken  of  they  should  be  under- 
stood, unless  otherwise  specified,  to  mean  the  average 
high  or  low  water  mark ;  that  is  to  say,  the  mean  of  the 
greatest  height  to  which  the  flood  tide  brings  the  water, 
or  the  mean  of  the  lesser  height  at  the  ebb  of  the  tide, 
during  a  certain  period,  such  as  a  year.  In  many  in- 
stances the  term  "water-front  property"  is  used  to  dis- 
tinguish rights  which  exist  in  connection  with  improve- 
ments along  the  water-front,  such  as  a  bulkhead  right 
(that  is,  the  right  to  collect  cranage  and  wharfage  along 
a  stretch  of  water-front  which  has  been  improved  by 
a  bulkhead),  or  pier  rights  (that  is,  rights  of  cranage 
and  wharfage  at  a  pier  built  out  over  land  under  water 
but  connected  with  upland  in  the  rear  of  the  water  line). 
These  "water-front  property"  rights  may  belong  to  an 
owner  who  is  not  the  proprietor  of  uplands  in  the  rear. 

There  are  also  "water-front  property"  rights  of  still 
different  character,  but  generally  those  rights  which  you 
will  find  most  valuable  are  the  rights  to  the  use  of  land 
under  water  for  the  support  of  piers  and  platforms,  and 

332 


Water-front  Property 

pier  rights  and  bulkhead  rights  with  which  pass,  some- 
times, rights  of  passage  over  land  in  the  rear.  Then 
there  are  certain  "water-front  property"  rights  which 
are  particularly  valuable  in  many  instances,  this  par- 
ticular value  arising  from  a  combination  of  bulkhead  or 
pier  rights,  with  the  ownership  of  upland  which  may 
even  be  physically  separated  from  the  line  along  which 
frontal  rights  exist  by  a  marginal  street,  quay,  or  wharf. 
Such  a  joining  in  ownership  of  upland  with  frontal 
rights  gives  to  these  frontal  rights  frequently  an  unusual 
and  additional  element  of  value  which  is  known  as  the 
conjunctive  value  of  the  bulkhead  rights,  the  pier  rights, 
etc. 

In  some  instances  these  "water-front  property"  inter- 
ests arise  from  statutory  provisions,  in  other  instances 
from  grants  and  similar  instruments,  and  in  other  in- 
stances still,  such  as  in  the  case  of  a  right  of  access  to 
land  reaching  to  the  low  water  mark,  from  ancient  cus- 
toms which  may  be  said  to  give  rise  to  common  law 
water-front  property  rights.  In  some  instances  the 
physical  ownership  of  a  bulkhead  or  pier  may  be  in  one 
person,  and  the  rights  to  cranage  and  wharfage  at  the 
bulkhead  or  pier  in  another.  The  owner  of  pier  rights 
may  own  the  land  under  water  on  which  the  pier  stands, 
or  he  may  only  own  the  pier,  as  distinguished  from  the 
land  under  water,  or  he  may  have  only  the  rights  as 
distinguished  from  the  structure  of  the  pier.  Frequently 
the  ownership  of  rights  carries  obligations  to  keep  in 
repair,  etc. 

Extent  of  the  Water-Front 

Within  the  limits  of  Greater  New  York,  including 
all  the  boroughs,  the  water-frontage,  measured 

333 


Practical  Real  Estate  Methods 

along  the  high  water  mark,  including  improved 
and  unimproved  property,  is  in  the  neighborhood 
of  445  miles,  about  the  distance  between  Manhattan  and 
Buffalo.  No  other  port  in  the  world  has  such  an  extent 
of  water-front,  which  fortunately,  in  a  large  measure,  is 
of  such  a  physical  character  as  to  be  susceptible  of  easy 
commercial  water-front  development. 

Ownership  in  Manhattan 

The  ownership  of  the  water-front  varies  greatly  ac- 
cording to  the  boroughs,  the  municipality  having  com- 
paratively little  property  except  around  the  Island  of 
Manhattan,  which  forms  the  old  city  and  county  of  New 
York.  Around  the  Bronx,  Queens,  Brooklyn  and 
Richmond  boroughs  ownership  is  generally  in  the  State 
of  New  York  or  private  individuals  or  corporations, 
though  this  ownership  in  many  places  has  not  yet  been 
finally  determined  by  decisions  of  the  courts  in  legal 
proceedings  which  have  arisen  through  claims  made  by 
the  municipality  as  successor  to  the  old  townships  now 
incorporated  in  the  city  limits. 

In  Manhattan  the  municipal  ownership  is  about  three- 
fifths  of  the  water  front,  and  it  is  in  this  borough  that 
the  water-front  has  attained  its  greatest  value  and  where 
the  greatest  congestion  exists.  To  give  in  detail  an  idea 
of  water-front  titles  in  the  various  boroughs — strictly  a 
legal  question — though  interesting  and  generally  little 
known,  would  occupy  too  extended  space  for  this  chapter. 
I  must  confine  myself  to  saying  that  around  Manhattan 
the  Dutch  West  India  Company,  claiming  ownership, 
made  the  earliest  transfers  of  title,  and  a  map  exists 
of  such  of  these  transfers  as  were  situated  below  Wall 

334 


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335 


Practical  Real  Estate  Methods 

Street.  All  further  transfers  by  this  company,  of  course, 
ceased  with  the  first  occupation  of  New  Amsterdam  by 
the  British  (1665).  In  regard  to  this  occupation  and 
the  subsequent  change  of  sovereignty  from  the  British 
Crown  to  the  People  of  the  State  of  New  York,  it  must 
be  borne  in  mind  that,  by  force  of  treaties,  statutes  and 
well-established  principles  of  law,  all  the  land  which  in 
1775,  the  beginning  of  the  War  of  Independence,  be- 
longed to  the  Crown  of  Great  Britain  became  vested 
in  the  People  of  the  State.  With  respect  to  lands  to 
which  titles  before  that  had  been  legally  acquired  by 
individuals,  either  from  the  British  Crown  or  under 
Dutch  rule  prior  to  1665,  the  change  from  Dutch  to 
English  sovereignty  and  through  the  Revolution  from 
the  Crown  to  the  People  of  the  State,  effected  no  for- 
feiture, of  itself,  of  the  individual  ownership  in  such 
lands. 

Immediately  upon  the  assumption  of  English  sover- 
eignty, the  City  of  New  York  received  its  first  English 
municipal  charter,  known  as  the  Nicoll  Charter.  This 
was  followed  by  the  Dongan  Charter  (1686),  the  Corn- 
bury  Charter  (1708)  and  the  Montgomerie  Charter 
(1730),  in  all  of  which  last  three  charters  grants  of 
water-front  property  were  made  to  the  municipality  by 
the  Crown,  these  grants  being,  however,  subject  to  grants 
already  made  by  the  Crown  to  private  individuals.  The 
first  of  these  grants  to  the  city,  and  which  was  in  the 
Dongan  Charter,  was  of  the  land  between  high  and  low 
water  mark  all  around  the  Island  of  Manhattan  and 
confirmed  to  the  municipality  ownership  of  the  first  docks 
built — which  had  been  constructed  in  the  city  at  the 
foot  of  what  is  now  Broad  Street,  through  which  in 
early  days  was  a  canal.  These  were  known  as  the  East 

336 


Water-front  Property 

and  West  Wet  Docks,  into  which  docks  what  would  now 
be  called  a  pier,  but  which  was  then  called  a  bridge, 
extended. 

The  Cornbury  Charter  gave  to  the  old  City  of  New 
York  ferry  and  other  rights  along  the  Brooklyn  shore, 
and  the  Montgomerie  Charter  gave  to  the  city  the  land 
under  water  in  the  Hudson  River  to  a  distance  400  feet 
beyond  low-water  mark,  from  a  little  stream  called 
Minetta  Rivulet  (emptying  into  the  Hudson  at  what  is 
now  about  the  foot  of  West  Houston  Street),  down  to 
the  Battery;  and  thence,  excepting  a  short  stretch  which 
was  in  front  of  the  then  British  Fort  George,  up  the 
East  River  as  far  as  Corlear's  Hook. 

After  the  Revolution  the  State  made  various  grants 
to  the  city  around  the  Island  of  Manhattan,  and  some 
grants  to  private  individuals.  But  most  of  the  private 
ownership  around  Manhattan  arose  through  direct  grants 
made  in  turn  by  the  city  of  property  which  it  had  thus 
received  from  the  Crown  or  the  State  of  New  York; 
and  the  bulkhead  rights  and  pier  rights,  which  are  now 
being  condemned  as  the  work  of  municipal  improvement 
of  Manhattan's  water-front  progresses,  came  generally 
from  grants  by  the  city  or  from  authority  given  by  the 
city  under  various  statutes  (such,  for  example,  as  the 
Law  of  1798)  to  private  riparian  owners  to  build  out 
piers  over  land  still  owned  by  the  city,  or  to  construct 
bulkheads,  with  rights  of  cranage  and  wharfage  on  these 
piers  and  against  these  bulkheads,  to  those  paying  for 
their  construction. 

In  connection  with  the  foregoing  it  is  interesting  to 
note  that  the  original  line  of  high-water  mark  along 
the  East  River  was  Pearl  Street,  and  along  the  North 
River  Greenwich  Street. 

337 


Practical  Real  Estate  Methods 

Ownership  in  Other  Boroughs 

In  the  Bronx  water-front,  the  original  titles  to  land 
in  private  owners  came  through  grants  from  Governors 
Nicoll,  Dongan,  etc.,  and  Letters  Patent  such,  for  ex- 
ample, as  the  Pelham  grant  issued  to  Thos.  Pell  in  1666, 
and  through  grants  from  the  townships  of  Morrisania, 
West  Farms,  etc.,  of  property  previously  granted  to 
them. 

In  Brooklyn  and  in  Queens  there  were  a  number  of 
Colonial  grants  made  to  the  inhabitants  and  towns,  such, 
for  example,  as  the  Breuklen  patent  (from  Governor 
Nicoll),  October  18,  1667,  covering  the  Gowanus,  Bed- 
ford and  Wallabout  districts.  The  towns,  in  turn,  after 
receiving  their  grants,  frequently  divested  themselves  of 
titles  by  grants  of  water-front  to  private  individuals; 
but  lands  under  water  within  the  old  town  limits  on 
Long  Island  were  not,  as  a  general  rule,  conveyed  by 
the  towns  until  of  recent  years,  when  they  became  of 
considerable  value  and  were  frequently  sold. 

Under  the  original  patents  the  towns  obtained  havens, 
harbors,  creeks,  marshes,  waters,  rivers,  lakes,  fishing, 
etc.,  and  such  of  the  property  rights  as  were  acquired 
by  the  old  towns  and  not  ceded  by  them  now  belong 
to  the  Greater  City.  The  old  City  of  New  York  made 
grants  to  owners  of  upland  along  the  Brooklyn  shore 
of  land  under  water  in  front  of  their  property. 

In  Richmond  Borough,  as  the  Colonial  patents  on 
Staten  Island  appear  to  include  no  water  grants,  the 
only  way  generally  in  which  the  city  can  at  the  present 
moment  own  property  would  be  by  a  grant  from  the 
State  of  New  York  to  the  old  townships  and  villages 
within  Richmond  county,  or  through  condemnation  pro- 

338 


Water-front  Property 

ceedings  in  street  openings  taken  by  these  authorities, 
though  the  highway  laws  under  which  the  roads  in  Rich- 
mond county  were  opened  did  not  vest  an  absolute  public 
ownership  in  fee  in  the  beds  of  the  roads  and  streets. 
Private  ownership  in  this  borough  has,  therefore,  arisen 
generally  by  direct  grants  from  the  State. 

In  all  the  boroughs  the  United  States  Government 
has  acquired  water-front  properties  (such  as  the  barge 
office  site  in  Manhattan,  the  navy  yard  in  Brooklyn,  the 
light-house  station  in  Staten  Island,  Fort  Schuyler's  site 
in  the  Bronx)  by  grant  coupled  with  a  ceding  by  the 
State  to  the  Federal  Government  of  jurisdiction  over 
the  property  acquired. 

Improvements — Cost — Tidal  Differences 

The  two  principal  plans  of  water-front  improvements 
adapted  to  shipping  are,  in  general,  the  basin  plan  and 
the  pier  plan.  If  we  look  to  see  in  which  ports  each  has 
been  put  into  operation,  we  will  find  that  in  those  ports 
where  there  is  a  large  tidal  difference  the  basin  plan 
is  adopted,  while  in  those  ports  where  the  tidal  difference 
is  small,  say,  below  eight  feet,  the  pier  plan  has  been 
adopted.  The  plan  of  water-front  improvement  depends 
in  reality  upon  the  tidal  differences  in  a  port.  The  most 
typical  example  in  the  world  of  the  basin  plan  is  to 
be  found  in  Liverpool,  where  there  is  a  rise  and  fall 
of  the  tide  varying  from  eighteen  to  twenty-five  feet, 
the  system,  in  brief,  consisting  of  a  number  of  basins 
in  which  the  water  and  ships  are  allowed  to  enter  when 
the  tide  is  full.  As  it  begins  to  ebb,  locks,  similar  to 
canal  locks  but  much  stronger,  are  closed  and  the  depth 
of  water  obtained  in  the  basin  at  high  tide  is  thus  pre- 
339 


Practical  Real  Estate  Methods 

served  for  the  flotation  of  the  ships  which  have  entered, 
until  a  new  high  tide  makes  it  possible  to  open  the  locks 
again.  Ships  are  limited  to  a  very  small  part  of  the 
day  in  which  to  enter  and  leave  basins.  This  system 
requires  the  most  solid  and  expensive  form  of  masonry 
construction,  and  is  the  most  costly  plan  of  improve- 
ment which  can  be  adopted,  but,  of  course,  presents  a 
handsome  appearance,  and  is  lasting  and  provides  fire- 
proof structure.  The  other  plan  consists  in  building  a 
marginal  quay,  wharf  or  street  with  a  bulkhead  (either 
crib  or  wall),  from  which,  generally  at  right  angles, 
piers,  built  on  cribs  or  spiles,  project  toward  the  channel. 
This  system  is  the  one  adopted  in  New  York,  where 
the  rise  and  fall  of  the  tide  is  between  four  and  a  half 
and  eight  feet,  generally  five.  The  pier  system  is  con- 
structed at  much  lower  cost  than  the  basin  system,  and 
has  a  number  of  advantages,  among  others  that  of  elas- 
ticity to  ships  lying  against  piers,  and  is  economical  of 
wharfage  room.  Its  chief  disadvantage  is  the  generally 
inflammable  character  of  the  sub-structure,  as  spiles  are 
still  generally  of  wood,  though  ferro-concrete  piling, 
which  is  absolutely  fireproof  and  which  has  been  in  use 
in  Europe  for  some  time,  is  beginning  to  be  considered 
for  water-front  work  in  this  country. 

The  most  expensive  feature  of  the  "new  plan"  sys- 
tem used  around  Manhattan  to-day  is  building  the 
bulkhead  wall,  of  which  there  are  over  twenty  different 
types,  the  cost  of  which  may  be  generally  estimated  from 
$300  to  $450  per  running  foot.  The  crib  bulkhead,  which 
characterized  the  "old  plan,"  may  cost  as  low  as  $30 
a  running  foot,  and  is  still  used  in  many  places.  The 
tendency  of  the  weight  on  the  top  of  a  marginal  street 
is  to  push  the  bulkhead  wall  out  or  to  overturn  it ;  hence, 

340 


Water-front  Property 

various  arrangements  of  platforms  have  been  devised  to 
suit  local  conditions,  and  to  change  the  direction  of  this 
overturning  force,  known  to  engineers  as  a  thrust.  It 
is  to  these  various  attempts  to  change  the  direction  of 
the  thrust,  and  the  different  character  of  the  bottom  at 
various  places,  that  the  different  types  of  wall  are  due. 
Dredging  is  the  first  operation  in  the  building  of  the 
bulkhead  wall.  This  is  known  as  crib  dredging,  to  dis- 
tinguish it  from  dredging  alongside  piers  and  bulkheads 
already  constructed,  to  maintain  a  certain  depth  of  water, 
which  is  known  as  mud  dredging.  As  to  the  cost  of 
the  construction  of  piers,  this  varies  very  much  with  the 
price  of  materials,  such  as  spiles,  and  particularly 
with  the  length  of  the  spiles  required  to  sustain  the  pier. 

Municipalization— "Old  Plan"— "New  Plan" 

Previous  to  1870  piers  and  crib  bulkheads  had  been 
built  around  the  water-front  of  Manhattan  according  to 
the  "old  plans,"  which  had  been  devised  in  some  instances 
by  the  city's  street  commissioner;  in  other  instances  as 
a  direct  result  of  action  by  the  Legislature  of  the  State; 
and  had  become  in  size  and  character  inadequate  to  meet 
the  growing  demands  of  the  commerce  of  the  port.  When 
a  new  City  Charter  was  adopted  by  the  Legislature  in 
1870,  provision  was  made  for  a  separate  dock  depart- 
ment to  have  charge  of  the  water-front,  which  was  known 
in  the  charter  as  the  Board  of  Docks.  This  board  was 
empowered  under  the  laws  of  1871  to  adopt  new  plans 
for  the  improvement  of  the  water-front,  which,  when 
they  were  once  ratified  by  the  Commissioners  of  the 
Sinking  Fund,  became  binding  in  regard  to  new  con- 
struction. It  is  under  this  "new  plan"  that  the  work 

341 


Practical  Real  Estate  Methods 

is  proceeding  to-day,  though  the  old  Board  of  Docks 
has  been  replaced  by  a  single  commissioner  at  the  head 
of  the  Department  of  Docks  and  Ferries. 


Limitation  on  Improvements — Harbor  Lines — Plans 
for  Private  Improvements 

The  same  constant  tendency  which  exists  among 
abutting  owners  to  encroach  on  the  street  lines,  exists 
among  shore  owners  to  encroach  on  the  beds  of  nav- 
igable waters.  Hence  it  is  necessary  to  establish  what 
are  known  as  harbor  lines,  settling  a  point  beyond  which 
solid  fillings  cannot  be  put  (i.  e.,  bulkhead  lines),  nor 
platforms  nor  piers  built  (i.  e.,  pierhead  lines).  These 
lines  are  now  established  by  the  Federal  Government, 
but  were  formerly  laid  down  in  some  instances  by  the 
city  and  some  by  the  State.  In  1857  a  harbor  commis- 
sion laid  out  a  general  set  of  lines  for  the  port  of  New 
York  as  it  then  existed.  Moreover,  plans  for  improve- 
ments, even  of  private  property,  have  to  be  passed  upon 
by  the  authorities.  All  of  this  should  be  carefully  borne 
in  mind  by  prospective  purchasers  of  water-front  prop- 
erty, particularly  of  land  under  water. 

Acquisition  —  Leases  —  Sales  —  Condemnation   Pro- 
ceedings —  Expert  Testimony 

Sales  of  water-front  property  around  the  Island  of 
Manhattan,  of  course,  are  becoming  fewer  and  fewer, 
particularly  in  the  lower  half  of  the  island,  as  muni- 
cipalization  proceeds.  In  the  other  boroughs  munici- 
palization  has  not  taken  place  to  any  great  extent,  and 
consequently  there  is  a  considerable  field  therein.  What 

342 


Water-front  Property 

is  meant  by  "municipalization"  is  acquisition  by  the  city 
of  private  water-front  property  rights  and  the  subse- 
quent improvement  of  property  taken,  according  to 
the  "new  plan,"  an  acquisition  which  may  take  place 
either  by  sale  to  the  city  or  by  condemnation  proceed- 
ings by  the  city,  under  provision  of  various  acts  of  the 
Legislature.  These  proceedings  consist,  in  brief,  of  a 
petition  which  is  presented  to  the  court  by  the  city, 
praying  for  condemnation  of  the  property  for  public 
purposes;  appointment  by  the  court  of  commissioners 
of  estimate  and  appraisal  to  pass  upon  the  value  of  the 
property  to  be  taken ;  presentation  by  the  owners  of  the 
rights,  of  proof  of  their  title  and  of  the  value  of  the 
property  (which  the  city  seeks  to  acquire).  This  is 
done  through  expert  witnesses,  who  testify  as  to  its 
value,  their  eligibility  to  testify  as  experts  being  based 
upon  their  knowledge  of  water-front  values,  which  may 
be  acquired,  as,  for  example,  from  experience  derived 
from  actual  purchases  and  leases  of  water-front  property 
made  by  the  expert.  The  final  step  is  a  report  by  the 
commissioners  of  the  value. 

Referring  to  leases,  it  should  be  borne  in  mind  that 
they  may  be  obtained  of  city  property  for  long  periods 
up  to  50  years,  and  that  since  the  abolition  of  the  old 
Board  of  Docks  they  have  to  be  ratified  by  the  Com- 
missioners of  the  Sinking  Fund  before  they  are  binding 
on  the  city. 

Units  of  Value  — -  Conjunctive  Value 

In  making  appraisals  it  is  customary  to  adopt  units 
of  measurement  differing  from  those  for  ordinary  real 
estate  plots.  For  land  under  water  the  unit  is  the  square 

343 


Practical  Real  Estate  Methods 

foot,  for  bulkhead  rights  the  running  foot.  In  regard 
to  pier  rights  the  units  of  measurements  differ  according 
to  the  special  circumstances  governing  the  case,  as,  for 
example,  whether  bulkhead  rights  go  with  the  pier 
rights,  in  which  case  the  unit  would  generally  be  the 
square  foot  of  controlled  area;  in  other  cases  the  lineal 
foot  of  water-frontage  occupied,  or  the  lineal  foot  of 
wharfage  room;  in  other  cases  still,  the  square  foot  of 
pier  area,  etc.  All  units  may  be  given  a  very  greatly 
added  value  through  what  has  heretofore  been  explained 
as  the  conjunctive  value,  and  for  other  reasons,  for 
example,  whether  or  not  there  is  a  right  to  shed  the 
pier.  The  location  of  the  pier  and  many  other  points 
have  to  be  considered,  including  the  legal  character  of 
the  rights  in  each  particular  instance. 

Management — Special  Kinds  of  Usage 

Water-front  property  must  be  managed  from  the  point 
of  view  of  the  water-front  and  not  from  the  point  of 
view  of  upland  property,  if  the  highest  return  thereon 
in  the  way  of  revenue  is  to  be  obtained.  This  is  very 
important,  and  in  many  sections  of  the  city  you  will 
find  two  pieces  of  property  similarly  situated,  one  yield- 
ing a  high  return  because  this  fact  has  been  kept  in  view, 
and  the  other  yielding  comparatively  little,  much  to  the 
detriment  apparently  of  the  fee  value,  until  the  pos- 
sibilities are  carefully  studied  from  the  point  of  view 
of  water-front  usage. 

Special  kinds  of  usage  have  developed  around  the 
water-front  in  various  localities.  Some  places  have  be- 
come centers  for  the  distribution  of  railroad  freight, 
others  for  the  great  steamship  lines.  In  one  spot  on 

344 


Water-front  Property 

the  North  River  the  hay  trade  congregates  and  in  an- 
other the  brick  trade.  Peculiar  arrangements  for  land- 
ing may  be  found  in  the  railroad  transfer  bridges,  in 
the  ferry  slips,  in  the  ice  bridges.  These  and  many 
particular  kinds  of  usage  as  the  dumping  boards  (for 
the  disposal  of  what  is  technically  known  as  cellar  dirt, 
generally  consisting  of  excavations,  etc.)  and  centers  of 
trade,  demand  special  study.  The  relationship  which 
the  water-front  bears  to  the  markets  of  the  city,  such 
as  the  Oyster  Basin  at  the  Gansevoort  Market  (New 
West  Washington  Market)  and  the  Wallabout  Basin 
in  front  of  the  Wallabout  Market  in  Brooklyn,  will  prove 
interesting. 

Taxation 

Water-front  property  rights  are  subject  to  taxation 
just  as  upland  real  estate  is  taxed,  though  leasehold 
property  of  the  city  is  not  taxed  by  it. 


Maps  —  Records 

The  chief  water-front  map  of  the  city  is  the  Greater 
New  York  water-front  survey  arranged  in  sheets.  This 
has  been  published  on  a  reduced  scale.  Next  in  im- 
portance to  the  present  water-front  survey  is  the  Mc- 
Clellan  survey  of  1870,  and  the  maps  formerly  com- 
piled under  the  direction  of  the  Street  Commissioner, 
of  which  there  are  about  300  in  13  volumes,  many  of 
which  refer  to  the  water-front.  Of  these  one  of  the 
most  useful  is  the  Randall  map  made  in  1820  by  John 
Randall,  Jr.,  pursuant  to  a  resolution  of  the  Common 
Council  to  show  the  location  of  the  farm  lines,  topog- 
raphy of  the  land,  streams,  ponds,  water-courses,  etc. 

345 


Practical  Real  Estate  Methods 

In  using  this  map  dimensions  have  to  be  obtained  by 
scale.  It  gives  high  and  low  water  marks.  There  are 
also  a  large  number  of  old-shore  maps  and  many  maps 
dealing  with  certain  particular  water-front  sections  of 
the  city,  which  will  be  found  of  great  service  for  special 
purposes.  Nor  should  water-front  records  of  tides  and 
currents  be  overlooked,  the  records  of  tidal  heights  being 
of  service  in  establishing  on  a  piece  of  property  the 
mean  lines  of  high  and  low  water  marks. 


346 


REAL  ESTATE  MOVEMENTS  IN 
THE  BRONX 

J.  CLARENCE  DAVIES 

Effect  of  Factories— Lines  of  Development-— Increas- 
ing Values — Gains  Spasmodic  Rather  Than  Regular 
— Business  Centers  and  Density  as  Factors — Modern 
Instances. 

THE  modern  development  of  the  Bronx  started  about 
1884.  At  that  time  a  merchant,  who  had  pur- 
chased from  the  Morris  Estate  and  the  Port  Mor- 
ris Land  Improvement  Company  a  tract  of  land  around 
what  was  known  later  as  North  New  York,  built  a  series 
of  two-family  brick  houses  in  rows.  These  houses  were 
put  up  by  O'Gorman  &  Stursburg  and  extended  from 
1 38th  Street  to  about  I4ist  Street.  Altogether,  during 
that  series  of  years  from  1884  to  1890  this  one  firm 
built  possibly  four  hundred  of  these  houses.  They  were 
such  a  great  success  in  renting  and  in  selling  that  the 
building  of  flats  soon  followed.  The  flats  were  financed 
more  or  less  by  building  loan  operators  who  had  been 
operating  in  Harlem  and  in  New  York  City  itself.  About 
1890  the  population  of  the  Bronx  was  about  70,000. 

Operators  have  purchased  land  from  the  original 
owners — that  is  to  say,  the  old  wealthy  merchants — 
have  cut  it  up  into  lots  and  then  sold  it  at  auction.  The 
lots  were  built  upon  at  first  with  frame  houses,  which 
are  now  passing  away.  Tenements,  apartment  houses 

347 


Practical  Real  Estate  Methods 

and  flats  are  now  being  built.  The  leading  local  settle- 
ments are  now  becoming  the  business  centers  and  a 
modern  city  is  being  built  up  which  is  increasing  at  the 
rate  of  125  per  cent  every  ten  years,  or  about  an  average 
of  twelve  or  fifteen  per  cent  per  annum,  in  population, 
resources  and  assessed  values. 


Effect  of  Factories 

In  speaking  of  the  development  of  the  Bronx  one  must 
consider  a  great  many  factors.  In  the  first  place,  every 
section  must  have  within  itself  some  one  thing  to  bring 
people  there,  and  to  keep  them  there  after  they  arrive, 
and  to  distribute  money  among  them.  That  means  that 
we  should  have — and  we  have  it — a  large  money  dis- 
tributing factor  in  the  manufacturing  interests  of  the 
Bronx.  The  first  factory  founded  up  there  was  the 
Jordan  L.  Mott  Iron  Works,  started  about  1830  or  1840. 
One  factory  followed  another  until  the  Mott  Haven  dis- 
trict and  North  New  York  district  were  rapidly  built  up. 
When,  in  1890,  the  flats  were  commenced  they  were  rap- 
idly filled  by  the  factory  population,  and  made  a  paying 
investment. 

The  line  of  development  then  followed  the  elevated 
railroad,  which  started  up  there  in  1890  and  first  ran 
to  the  Harlem  River  and  then  to  i7Qth  Street.  Later 
we  obtained  through  trains  for  one  fare,  from  the  Battery 
to  Tremont.  All  these  things  caused  a  rapid  growth 
along  the  lines  of  Third  Avenue  and  the  elevated  rail- 
road. The  development  of  the  Bronx,  and,  in  fact,  of 
any  suburban  district,  will  be  along  the  line  of  transit 
facilities.  That  has  been  the  history  of  every  section. 

348 


Real  Estate  Movements  in  the  Bronx 

Increasing  Values 

In  the  future,  values  in  the  Bronx  will  be  just  as  large 
as  they  are  downtown,  and  far  larger  in  this  section  than 
they  will  be  in  other  sections  and  other  boroughs. 

A  sale  was  made  on  Tuesday,  June  17,  1884 — portions 
of  the  Fox  estate,  directly  on  the  line  of  the  suburban 
rapid  transit  route.  It  appears  that  a  suburban  rapid 
transit  route  was  laid  out,  which  the  Fox  people  never 
built. 

This  property  lies  along  Westchester  Avenue,  begin- 
ning near  the  Prospect  Avenue  station,  that  is,  right 
along  the  line  of  the  subway  to-day,  and  runs  up  to 
about  the  line  of  the  Southern  Boulevard,  the  Simpson 
Street  station.  At  that  time  a  large  gore  lot  on  West- 
Chester  Avenue  and  on  Kelly  Street  sold  for  $200.  My 
impression  is  that  it  sold  for  thirty  per  cent  cash,  the 
balance  remaining  on  mortgage.  The  lots  adjoining 
this  corner — which  is  to-day  worth,  I  should  say,  from 
$16,000  to  $18,000 — sold  for  $180,  running  through 
from  street  to  street,  and  for  $115  apiece  on  Westchester 
Avenue.  They  are  worth  from  $7,500  to  $10,000  apiece 
to-day. 

On  Tiffany  Street  they  sold  for  $150  apiece. 

On  the  Southern  Boulevard,  between  i67th  Street  and 
Holmes  Street,  they  sold  for  $275  apiece. 

On  Simpson  Street  they  sold  for  $170  apiece — quite 
a  good  price. 

On  Bristow  and  Jennings  Streets  they  sold  as  high  as 
$60  and  $65  a  lot,  and  the  corner  brought  as  much  as 
$150.  The  average  price  realized  at  that  auction  sale 
was  $100  or  $110  or  $115,  and  the  average  value  of  those 
lots  to-day  would  be  about  $6,500  or  $7,000  a  lot.  So 

349 


Practical  Real  Estate  Methods 

that  a  man  who  invested  $30  or  $40  at  this  auction  sale, 
and  paid  all  taxes  and  assessments  and  interest  on  the 
mortgage,  you  will  see,  would  be  pretty  well  ahead  of 
the  game  to-day. 


Gains  Not  Regular 

I  do  not  wish  to  give  you  the  impression  that  this 
growth  has  been  a  constant  growth.  I  think  that  is  one 
of  the  mistakes  the  majority  of  people  make — about  the 
growth  of  vacant  land.  A  lot  sold  at  auction  will  not 
increase  five  per  cent  or  six  per  cent  per  annum  and 
keep  that  growth  up  steadily.  Every  experienced  real 
estate  operator  knows  that  values  do  not  grow  in  that 
way.  As  an  example  consider  the  piece  of  property 
lying  on  Crotona  Avenue,  running  from  I75th  Street  and 
Third  Avenue  to  the  Southern  Boulevard,  known  as  the 
George  Faile  estate.  These  lots  were  sold  at  auction 
November  12,  1890,  and  they  ranged  in  price  from  $650 
a  lot  to  about  $1,000  for  corners.  That  is  only  about 
eighteen  years  ago,  and  the  value  of  these  lots  to-day 
is  about  $5,000  apiece,  and  I  doubt  if  any  man  who 
bought  one  of  these  lots  for  $600  or  $700,  paying  thirty 
per  cent  cash  down  and  his  interest  and  assessments  later, 
has  not  made  on  that  original  $200  investment  $2,500 
to  $3,000  in  eighteen  years. 

Take  a  lot  which  I  myself  sold  at  the  corner  of  what 
was  then  known  as  Potter  Place  and  Jerome  Avenue, 
sold  at  auction  about  1892.  The  value  of  that  lot  in 
1892  was  $750;  it  sold  at  auction  for  $680. 

In  1893  that  lot  was  worth  about  $900. 

In  1894  it  was  worth  about  $950. 

In  1895  it  was  valued  at  $950 — no  increase. 

350 


Real  Estate  Movements  in  the  Bronx 

In  1896  they  were  asking  for  that  land,  or  for  land 
of  that  same  nature,  $1,000;  in  1897,  $1,000. 

In  1898  the  neighborhood  began  to  build  up  and  the 
value  jumped  to  $1,250  and  remained  at  that  figure  until 
1900.  More  improvements  were  made  and  assessments 
paid  and  lots  went  up  in  1901  to  about  $1,500. 

In  1902  the  value  jumped  to  $2,000,  in  1904  to  $2,500; 
in  1905  to  $3,500;  in  1906  to  $4,500  —  the  present 
value  of  the  lot  to-day — about  $4,500,  although  they  are 
asking  $5,000. 

If  you  buy  a  lot  at  auction  you  must  not  consider  that 
it  increases  steadily  in  value  every  year;  it  does  not.  It 
may  run  along  for  a  series  of  years  and  you  can't  see  any 
improvement.  You  pay  assessments  and  interest  on  your 
mortgage,  and  taxes,  and  still  you  can't  see  any  increase 
in  the  value  of  the  lot.  And  you  believe  you  are  going 
to  lose  money.  But  there  will  come  one  year,  or  two 
years,  in  which  the  increase  will  be  some  two  or  three 
or  four  hundred  per  cent.  It  will  run  along  on  this 
level  for  a  series  of  years  and  increase  perhaps  slightly, 
and  then  another  year  or  six  months  and  an  increase 
of  a  hundred  or  a  hundred  and  fifty  per  cent  will  come. 

In  other  words,  while  the  growth  over  a  series  of  years 
is  steady,  it  is  very  spasmodic  in  any  one  year. 

But  there  are  other  sorts  of  property,  as  I  have  found 
out  from  experience,  that  cannot  profitably  be  developed 
from  acreage  or  farm  property  or  estates  into  lots  and 
sold  at  public  auction.  If  you  take  lots  that  are  worth 
more  than  $1,000  apiece  or  $12,000  an  acre,  you  will 
rarely,  if  ever,  find  that  they  are  purchased  for  specula- 
tion, to  be  resold  at  an  auction  sale.  As  a  general  rule, 
property  that  is  put  up  at  an  auction  sale  is  purchased 
for  from  $3,000  to  $10,000  an  acre.  The  general  public 

351 


Practical  Real  Estate  Methods 

does  not,  as  a  rule,  buy  high-priced  lots  at  an  auction. 
To  meet  success,  when  sent  under  the  hammer,  lots 
should  be  valued  at  from  $300  to  $800  apiece.  At  least, 
that  is  what  the  experience  of  the  Bronx  has  shown. 
But  any  lot  bought  at  a  public  auction  sale  from  an 
estate  that  has  cut  it  up  and  put  it  on  the  market,  is 
as  sure  to  make  money  for  its  buyer  as  anything  on  this 
earth  is  certain,  provided  the  owner  simply  sits  down 
and  waits  for  that  section  to  grow  up.  A  man  who 
buys  a  lot  at  such  a  sale  is  getting  it  from  first  hands; 
he  is  not  buying  it  after  the  property  has  been  exploited 
by  booms  or  anything  of  that  kind.  My  experience  of 
the  Bronx  has  shown  that  these  auction  sales  are  the 
best  method  of  acquiring  land  to  make  money  on. 


Business  Centers  and  Density 

When  I  am  asked  at  my  office  how  I  advise  people 
to  invest  in  real  estate  in  the  Bronx,  I  invariably  give 
one  answer,  "Buy,  if  you  can  afford  it,  on  the  leading 
avenues,  and  in  the  business  centers  if  it  is  possible. 
Get  something,  if  you  can,  with  a  building  on  it,  to  help 
carry  the  property  along.  Experience  has  shown  that 
these  business  centers  become  more  valuable  as  popula- 
tion increases."  Business  centers  vary  in  what  I  call  the 
density  of  their  population  and,  in  this  connection,  I  want 
to  state  also  one  reason  why  values  are  higher  right  here 
to-day  and  will  be  still  higher  in  the  future  than  in  the 
other  boroughs,  leaving  out  Manhattan.  Take  a  block 
600  feet  long  and  200  feet  wide,  the  average  block  in 
one  of  the  prettiest  sections  of  Brooklyn,  the  Flatbush 
section.  This  is  covered  with  very  pretty  two  family 
houses,  ten  people  to  a  house,  each  one  standing  on 

352 


Real  Estate  Movements  in  the  Bronx 

a  forty-foot  lot.  These  families  will  form  a  population 
of  about  three  hundred  people.  I  am  not  speaking  of 
the  esthetic  side  of  the  question  at  all.  I  don't  say  that 
what  we  do  in  the  Bronx  is  the  best  thing  for  the  phys- 
ical comfort  or  for  the  morals  of  the  population.  Now, 
in  the  Bronx,  in  five-story  apartment  houses,  with  four 
families  to  a  floor,  there  will  be  3,000  people  living  on 
a  plot  of  ground  200x600  feet  in  size  as  against  300 
people  living  on  the  same  sized  Brooklyn  block.  These 
3,000  people  require  stores  in  proportion.  The  thirty 
houses  in  Brooklyn,  on  an  average  of  $40  a  house,  will 
produce  $1,200  rental.  In  the  Bronx,  if  the  rooms  rent 
only  for  an  average  of  $3.50  or  $4  a  room,  the  total 
for  the  block  will  be  $12,000.  That  is  the  reason  that 
values  in  the  Bronx  are  so  much  higher  than  in  the  other 
boroughs  outside  Manhattan,  and  always  will  be  so, 
because  the  main  factor  is  their  density  of  population. 

The  density  of  population  makes  values  and  also  makes 
business  centers.  If  a  person  will  look  a  little  ahead  and 
buy  to-day  at  the  junctions  of  great  avenues  or  cross- 
town  streets,  he  is  bound  to  make  money  from  his  in- 
vestment. 

The  Nimphius  Case 

The  Morris  family  owned  a  large  part  of  this  section 
and,  in  generation  after  generation,  it  was  split  up  among 
different  members.  Gerard  Morris  sold  in  1853  a  plot 
of  ground  at  the  Southwest  corner  of  i4Qth  Street  and 
Third  Avenue,  where  Hegeman's  drug  store  is  now  lo- 
cated, to  John  Nimphius.  It  fronted  150  feet  on  what  was 
then  Benson  Street.  Nimphius  kept  a  little  tavern  there 
for  a  number  of  years.  He  paid  $300  for  the  land  he 
occupied.  Along  about  1895  he  sold  two  lots  on  the 

353 


Practical  Real  Estate  Methods 

Third  Avenue  side  for  about  $9,500.  The  property  then 
had  been  widened  by  the  opening  of  Third  Avenue. 
About  1896  the  city  commenced  to  widen  I49th  Street 
and  cut  a  strip  of  about  nine  feet  wide  off  his  property. 
He  got  an  award  from  the  city  for  this  piece  of  $40,000. 
In  1900  or  1901  I  myself  sold  the  balance  of  this  property 
for  the  sons  for  $70,000.  That  is  $119,500  for  an  invest- 
ment of  $300,  to  say  nothing  of  the  use  of  the  property 
for  fifty  years.  That  is  what  buying  in  a  center  means. 

Now,  it  doesn't  require  any  great  judgment  for  that. 
You  can  look  around  in  the  Bronx  and  in  Brooklyn  and 
find  old  lanes  running  to  a  center  in  the  same  way. 

The  northwest  corner  of  Westchester  Avenue  and  Third 
Avenue  was  purchased  in  1888  by  Mr.  Franklin  A. 
Wilcox  for  $48,000 — $8,000  cash  and  $40,000  on  mort- 
gage. This  piece  fronted  about  150  feet  on  Third  Ave- 
nue and  200  feet  on  Westchester  Avenue  and  was  en- 
cumbered with  old  frame  buildings.  Mr.  Wilcox  kept 
that  piece  of  property  until  the  early  part  of  1905 — some 
three  years  ago — when  I  sold  it  for  him  for  $295,000 — 
all  cash.  That  is  what  he  made  on  his  original  invest- 
ment of  $8,000.  During  the  sixteen  or  seventeen  years 
he  held  it  the  property  returned  an  average  rent  of  four 
or  five  thousand  dollars  a  year.  This  is  another  example 
of  the  result  of  buying  in  business  centers. 


354 


ACREAGE-HOW  TO  DEVELOP  IT 

DEAN  ALVORD 


Laying  Service  Lines — Wide  Street  Effects — Trees 
and  How  to  Plant  Them— The  Art  of  Sidewalks- 
Natural  Landscaping — Utilitarian  Features 

DEVELOPMENT  of  suburban  property  to  the  highest 
point  possible  is  to  solve  the  question  of  living 
for  the  great  middle  class  of  our  population  which 
for  the  past  few  years  has  been  groaning  for  release 
from  the  imprisonment  of  the  blockhouse  and  the  apart- 
ment.    The  subject  will  be  treated  solely  as  applied  to 
suburban  •  properties  built  up  with  detached  houses,  but 
within  the  limitations  imposed  by  the  municipal  authori- 
ties as  to  topography,  width  of  streets  and  the  distance 
between  the  latter. 

The  creation,  therefore,  of  a  "Rus  in  Urbe"  is  the  acme 
of  real  estate  development.  To  create  a  rural  park 
within  the  limitations  of  the  conventional  city  block  and 
city  street,  then,  is  the  task  set  for  the  suburban  de- 
veloper. 

Service  Lines  First 

This  means,  first,  the  abandonment  of  the  "row,"  and 
the  building  of  detached  houses  under  carefully  thought 
out  restrictions.  To  prevent  the  future  tearing  up  of 
pavements,  all  the  underground  pipes  for  sewer,  water, 
gas,  electric  light  and  telephone  wires,  not  only  in  the 
streets,  but  the  laterals  to  the  inside  of  every  lot,  should 

355 


Practical  Real  Estate  Methods 

be  first  laid.  Next  are  surface  improvements,  sidewalks, 
curbs  and  pavements.  This  work  should  be  all  completed 
before  a  single  house  is  erected,  thus  reversing  the  usual 
method  of  development.  But  it  is  the  details  of  the 
surface  improvements  and  of  the  landscape  effects  which 
give  to  a  property  any  claim  to  distinction  which  it 
possesses. 

In  order  to  introduce  as  much  as  possible  of  the  park- 
like  appearance,  every  effort  should  be  made  to  secure 
as  much  open  ground  as  can  be  obtained  with  the  limita- 
tions above  referred  to. 

Wide  Street  Effects 

The  width  of  a  street  is  determined  in  effect  by  the 
distance  between  the  rows  of  trees  which  line  its  sides. 
This  effect  of  width  is  greatly  enhanced  by  planting  the 
rows  of  trees  on  the  building  line  instead  of  near  the  curb. 
It  is  difficult  for  one  to  realize  how  great  is  this  difference 
until  he  sees  two  blocks  in  juxtaposition.  This  simple 
rule  will  give  an  ordinary  sixty  foot  street  the  effect  of 
a  broad  avenue. 

Tree  Planting 

The  trees  should  be  selected  with  reference  to  their 
adaptability  to  the  soil  and  also  to  the  width  of  the 
street  and  its  character.  A  broad,  winding  boulevard 
will  be  best  suited  to  large  varieties  like  the  oriental 
plane,  rock  maple  and  linden,  or  to  trees  of  spreading 
habit  like  the  American  elm.  Straight  and  narrow  streets 
will  look  best  lined  with  more  compact  and  formal  trees, 
like  Norway  maple.  Such  trees  as  the  Carolina  poplar, 
which  has  a  rapid  growth,  are  a  great  temptation  to  the 
developer  who  is  seeking  immediate  effect.  There  is  no 

356 


Acreage — How  to  Develop  It 

objection  to  them,  provided  they  are  planted  alternately 
with  the  permanent  trees,  and  also  provided  they  are  cut 
out  before  they  encroach  on  the  better  tree.  Great  care 
is  necessary  that  the  trees  be  not  planted  too  closely, 
as  even  after  they  are  full  grown  there  should  be  ample 
space  between  for  light  and  air. 

Norway  maples  should  stand  forty  feet  apart,  giving 
each  tree  an  opportunity  for  symmetrical  growth,  and 
that  individual  character  so  often  lacking  where  trees 
are  run  together  in  the  planting.  The  shadow  effects 
are  also  much  more  pleasing  where  the  sun's  rays  fall 
between  the  individuals  in  the  row  as  well  as  between 
the  rows  of  trees.  Placing  the  trees  in  the  position 
indicated,  on  the  building  line,  will  also  give  shade  both 
to  the  sidewalk  and  to  the  front  yards  of  the  residents. 
Here,  too,  they  are  beyond  the  reach  of  horses  standing 
at  the  curb. 

Sidewalks 

Lay  the  sidewalk  close  to  the  building  line,  and  as 
far  as  possible  from  the  curb,  leaving  a  broad  strip  of 
lawn  between  the  two.  This  may  be  decorated  with 
flowers,  and  shrubs  of  dwarf-growing  habit — and  selected 
with  reference  to  foliage  and  flowering  effect  at  different 
seasons  of  the  year.  Advantage  may  be  taken  of  the 
width  of  the  broader  streets  to  combine  the  two  lawn 
spaces  in  one  parkway  running  along  the  middle  of  the 
street,  with  a  driveway  on  either  side.  Between  sidewalk 
and  curb,  the  space  in  the  ordinary  sixty-foot  street  being 
limited  to  eight  or  nine  feet,  only  dwarf-growing  shrubs 
should  be  employed. 

The  smaller  spiraes,  berberis,  deutzias,  azaleas,  and 
cydonia,  among  the  deciduous  varieties,  and  the  smaller 

357 


Practical  Real  Estate  Methods 

of  the  evergreens  for  winter  effect  are  good.  The 
latter  are  better  grouped  in  the  center  parkway,  which 
will  perhaps  be  fifteen  feet  in  width.  Here  the  variety 
of  suitable  shrubs  may  be  much  enlarged,  the  added 
width  admitting  such  plants  as  the  rhododendron  and 
dwarf  magnolia,  many  of  the  retinosporas,  junipers,  the 
mugho  pine,  arborvitas  and  some  of  the  evergreen  aza- 
leas and  mahonias. 

Deciduous  plants  should  be  selected  with  reference 
to  the  effect  of  flower,  foliage  and  fruit,  the  latter  being 
most  ornate  after  the  leaves  have  disappeared  on  such 
shrubs  as  the  Berberis  Thunbergii,  corcorus,  ribes  and 
others. 

The  location  of  houses  upon  plots  does  much  to  make 
or  mar  the  general  effect  of  a  street  and  also  the  pleasure 
and  comfort  of  its  residents.  Restrictions  should  there- 
fore be  imposed  of  such  a  nature  as  to  regulate  exactly 
the  spot  on  each  lot  where  the  house  shall  stand.  In 
addition  to  a  specified  distance  between  the  front  wall 
and  the  street,  all  houses  on  north  and  south  streets 
should  stand  not  farther  than  five  feet  from  the  north 
line.  This  throws  the  lawns  uniformly  to  the  south  or 
living  side  of  each  house,  and  allows  for  the  greatest 
distance  between  the  houses. 

Another  restriction  which  contributes  much  to  a  beau- 
tiful appearance  is  that  all  lots  in  a  rectangular  layout 
should  have  a  uniform  grade.  If  in  the  laying  out  of 
the  property  the  plots  are  made  to  break  joints,  as  it 
were,  so  that  the  side  line  of  one  plot  shall  intersect  the 
rear  line  of  another  at  the  middle,  a  more  extended  and 
attractive  view  may  be  obtained  from  the  rear  of  each 
house  as  well  as  from  the  front.  This  latter  requirement, 
with  the  added  prohibition  of  all  fences  or  hedges  nearer 

358 


Acreage — -How  to  Develop  It 

the  street  than  the  front  line  of  the  houses,  provides 
practically  a  park  on  either  side  of  the  street  throughout 
the  entire  space  between  the  curb  and  house  front. 

Natural  Landscapes 

So  much  for  the  development  of-  the  suburb  with  its 
limitations  of  the  rectangular  block  and  the  straight 
street.  To  the  man  of  originality,  however,  the  most 
attractive  field  for  development  is  found  in  just  pure 
country,  rough  country,  where  nature  has  thrown  great 
boulders  about,  where  she  has  cut  deep  chasms,  thrown 
up  hills,  planted  great  trees,  sent  cascades  tumbling  down 
into  the  valleys.  Here  are  materials  for  the  artist  hand 
which  knows  how  to  use  them.  Here  lies  an  opportunity 
to  give  to  every  place  an  individuality  impossible  under 
the  conditions  we  have  been  considering. 

These  features  of  rock  and  hill  and  dale — priceless  in 
the  sight  of  the  artistic  developer — are  mere  obstructions 
to  the  man  who  does  not  know.  His  ruthless  activity 
ceases  not  until  every  beautiful  knoll  has  been  levelled, 
until  every  valley  has  been  filled  in,  until  every  grand, 
old,  moss-grown  boulder  has  been  blasted  into  building 
stone,  and  every  century  old  tree  converted  into  lumber. 
When  this  work  of  destruction  is  completed  and  the  land 
is  brought  at  great  expense  to  a  dead  level,  he  is  then 
prepared  to  commence  "improvements"  by  laying  cement 
curbs  and  sidewalks  and  building  shop  houses.  He 
doesn't  need  an  architect.  He  is  sufficient  unto  all 
things. 

Utilitarian  Features 

In  a  country  development  the  purely  utilitarian  fea- 
tures are  the  same  as  those  in  suburban  property. 

359 


Practical  Real  Estate  Methods 

First  and  foremost  is  drainage.  And  right  here  there 
is  a  good  deal  of  misinformation  abroad.  The  most  am- 
bitious developers  undertake  to  install  a  so-called  sewer 
system,  for  the  sake  of  advertising  purposes.  This  con- 
sists of  underground  pipes  laid  throughout  the  streets, 
often  with  very  inadequate  provision  for  the  outlet  and 
final  disposal  of  the  sewage.  Such  a  system  is  a  positive 
death  trap  and  is  far  inferior  to  the  ordinary  cesspool. 
As  a  matter  of  fact,  in  such  soil  as  is  found  over  a  good 
part  of  Long  Island,  the  septic  tank,  which  is  Colonel 
Waring's  improved  cesspool,  is  the  most  sanitary  system 
which  has  yet  been  devised,  and  where  properly  con- 
structed and  on  plots  of  half  an  acre  and  upwards,  is 
absolutely  safe. 

The  water  question  will,  of  course,  receive  the  most 
careful  attention  in  any  place  intended  for  human  habi- 
tation 

Physical  Treatment 

But  it  is  in  the  physical  treatment  of  the  surface  of 
the  ground  in  the  country  that  the  greatest  opportunity 
lies. 

Every  natural  feature  of  the  ground  should  be  most 
carefully  studied  in  its  relation  to  the  whole.  The  huge 
boulder  which  your  too  practical  builder  would  blast 
into  foundation  stone,  we  would  place  at  the  junction  of 
two  drives,  and  if  too  large  to  move,  we  would  place 
the  drives  so  that  they  should  converge  there.  Then 
plant  some  rock  cress  or  dwarf  phlox,  or  a  carpet  of  sea 
pink  partly  around  its  base  and  some  small  trailing  vines 
to  climb  up  its  sides  with  a  group  of  low  shrubs  in  the 
rear. 

Utilize  the  rocks  protruding  from  the  edge  of  the  hill- 


Acreage — How  to  Develop  It 

side  to  plant  those  things  whose  natural  habitat  is  among 
the  rocks — a  group  of  yuccas,  savind,  juniper  or  other 
low  growing  evergreens,  with  erect  evergreens  in  the 
background,  against  which  the  stately  white  yuccas  will 
stand  out  as  if  cut  in  marble. 

Fill  up  the  low  places  with  moisture  loving  plants, 
margin  the  pond  with  Japan  Iris,  lobelia  cardinalis,  the 
Japanese  grasses,  red  twigged  dogwood  and  yellow 
barked  willow. 

If  possible,  provide  ample  reservation  for  the  common 
pleasure  of  all  the  residents.  Convert  the  swamp  into 
a  lake  or  pond,  stocking  it  with  goldfish  to  eat  up  the 
larvae  of  the  mosquito.  The  value  of  land  devoted  to 
such  purposes  is  not  lost,  but  is  more  than  regained  by 
the  added  value  imparted  to  the  remainder. 

Look  out  for  fine  vistas  from  the  high  points;  if  you 
have  none,  create  them  by  good  planting. 

Avoidance  of  Straight  Lines 

Above  all,  get  away  from  the  straight  line.  Carry  the 
roads  through  the  valleys,  let  them  wind  among  the  hills 
and  never  use  asphalt  or  cement  in  country  work.  Build 
macadam  roads  and  gravel  paths,  park  roads,  with  grass 
gutters,  except  on  the  steep  slopes  where  gutters  should 
be  paved  with  cobble  stones. 

The  exact  location  of  the  house  on  each  site  should  be 
decided  in  advance  of  the  sale  of  the  plot,  and  the  pur- 
chaser compelled  to  build  on  the  designated  spot. 

The  setting  of  every  house  should  be  studied  and  plans 
approved  by  some  one  competent  to  determine  the  adap- 
tability of  the  house  to  its  location,  so  that  a  harmonious 
picture  may  be  created. 

361 


Practical  Real  Estate  Methods 

We  have  only  to  make  a  trip  to  downtown  Brook- 
lyn or  Manhattan  to  see  how  examples  of  beautiful 
architecture  have  been  sacrificed  to  the  surroundings. 
Classic  designs  which  call  for  an  isolated  location  with 
a  setting  of  green,  are  wedged  in  between  skyscrapers 
and  made  ridiculous  by  their  companionship.  Every 
architect  should  take  a  course  in  landscape  gardening  be- 
fore he  designs  a  building. 

The  architect  should  contribute  his  full  share  to  an 
artistic  development.  He  should  catch  the  real  spirit  of 
the  enterprise  at  the  outset  so  that  his  examples  of  do- 
mestic architecture  may  be  of  contrasting  but  harmonious 
design,  giving  to  the  whole  property  a  distinction  which 
would  be  lacking  without  his  skillful  treatment. 

The  one  consideration  which  should  dominate  the 
mind  of  the  developer  is  that  his  property  should  be 
treated  as  a  whole,  not  as  a  collection  of  units.  Every 
lot,  street,  park  and  building  should  be  studied  in  its 
relation  to  the  whole  property,  just  as  an  artist  regards 
every  stroke  of  his  brush  on  a  canvas.  In  this  way  there 
will  be  produced  an  ensemble  without  discord,  and  a 
feeling  of  harmony  and  restfulness  impossible  to  the 
urban  dweller,  and  he  will  then  realize  to  the  full  the 
great  benefits  of  country  residence. 


362 


MANAGING  A  REAL  ESTATE 
OFFICE 

RONALD  C.  LEE 

Importance  of  Exact  Information — List  of  Owners- 
List  of  Properties — New  York  System — Possible 
Purchasers  and  Tenants — Keeping  Track  of  Mort- 
gages— Appraisal  Records 

THE  real  estate  broker,  to  justify  his  existence,  must 
have  knowledge — knowledge  of  how  to  find  buy- 
ers and  sellers  in  the  greatest  quantity  and  quality, 
and  a  knowledge  of  values  and  conditions  that  will,  with 
the  least  labor,  match  buyers  and  sellers.    On  this  hangs 
all  the  law  and  profit  in  the  management  of  a  real  estate 
office. 

In  what  is  known  as  the  Metropolitan  District,  say 
within  a  radius  oi  twenty-five  miles  from  the  City  Hall, 
there  are  something  like  a  million  parcels  of  property 
held  by  a  half  million  owners,  and  leased  to  five  million 
tenants,  and  carrying  half  its  value  in  mortgages.  Each 
of  these  parcels,  mortgages,  leases,  year  after  year  means 
commissions  to  the  metropolitan  real  estate  broker.  No 
other  business  or  community  of  business  men  is  the 
means  of  handling  such  an  enormous  amount  of  money. 

Importance  of  Records 

The  machine  by  which  the  successful  broker  handles 
his  share  of  this  enormous  business  is  records,  and  in 

363 


Practical  Real  Estate  Methods 

just  the  degree  that  he  is  able  to  make  real  estate  rec- 
ords subservient  to  his  purpose,  is  he  successful.  And 
every  broker  who  eschews  haphazard  methods  and  con- 
ducts his  business  on  strictly  scientific  principles,  climbs 
as  far  as  possible  along  this  path.  His  success  is  in 
exact  ratio  to  his  ability  in  this  line  plus  his  own 
personality.  His  personality  reaches  only  to  the  people 
with  whom  he  actually  comes  in  contact.  Through  his 
employees  his  system  may  reach  to  infinity.  He  is  em- 
ployed to  save  his  clients  from  having  to  rely  on  chance, 
or  from  doing  a  part  of  this  work.  Time  with  the  prop- 
erty owner,  who  is  of  necessity  a  man  of  large  affairs, 
is  a  matter  of  money  and  much  money. 

Real  estate  is  not  considered  a  quick  asset,  and  this 
fact  diverts  an  enormous  amount  of  capital,  which  would 
otherwise  be  invested  in  that  direction.  The  successful 
broker  is  one  who  can  most  unerringly  bring  together  the 
buyer  and  seller,  mortgagor  and  mortgagee,  the  lessor 
and  lessee.  To  do  so,  he  must  have  records  posted  like 
a  huge  army  of  scouts  with  methods  of  intercommunica- 
tion to  facilitate  instantaneous  reports  to  headquarters — 
his  brain — and  this  is  no  easy  or  inexpensive  matter.  It 
means  clerks,  card  files,  reporters,  brokers,  and  subscrip- 
tions to  expensive  and  highly  developed  services  which 
gather  and  digest  this  information  for  his  consumption. 
Then  at  best  only  a  small  part  of  the  entire  territory  can 
be  covered,  but  the  separate  department  should  be  co- 
operative, or  the  full  measure  of  success  cannot  be  hoped 
for.  The  ideal  transaction  would  be  one  in  which  the 
broker  sells  the  lot  to  the  builder,  secures  a  building  loan, 
retires  the  building  loan  from  a  permanent  loan,  sells 
the  property  to  an  investor  and  continues  to  manage  the 
property  and  renew  the  loan  from  time  to  time. 

364 


Managing  a  Real  Estate  Office 

List  of  Owners 

First,  the  broker  must  know  who  would  sell.  To  do 
that  he  must  know  who  owns  the  property.  To  gather 
this  from  the  Hall  of  Records  is  an  insuperable  task; 
unless  one  name  in  the  chain  of  title  is  known,  it  is  prac- 
tically impossible.  Previous  to  1892,  the  index  to  con- 
veyances was  kept  in  alphabetical  order,  and  to  locate 
a  given  property  thousands  of  deeds  might  have  to  be 
read.  Since  1892  only  those  in  any  given  block  would 
have  to  be  followed  up.  But  that  in  itself  is  a  huge 
task.  This  work  has  all  been  simplified  by  the  compila- 
tion called  the  Real  Estate  Directory  of  Manhattan. 

This  directory  is  cross-indexed.  The  first  is  geograph- 
ical, according  to  street  number.  This  division  gives 
the  street  number,  the  block  and  lot  number,  the  last 
owner  of  record  at  the  date  of  publication,  the  date  of 
record,  and  in  the  case  of  multifamily  houses,  a  full  de- 
scription, such  as  flats  to  the  floor,  rooms  to  the  flat, 
steam  heat,  hot  water,  elevators,  store  fronts  and  the 
like.  The  second  classification  is  alphabetical.  In  this 
part  each  property  owner's  name  is  arranged  in  alpha- 
betical order,  followed  by  his  address  and  a  list  of  his 
holdings.  So,  to  locate  the  owner  of  a  particular  par- 
cel, turn  first  to  the  street,  glance  down  the  column  to 
the  number,  and  then  turn  to  the  name  given  in  the 
alphabetical  section  for  the  address.  But  ten  to  thirty 
thousand  parcels  change  hands  each  year.  How  can  it 
be  known  that  this  very  parcel  has  not  been  transferred? 
A  weekly  supplement  is  issued  giving  the  property  sold 
or  bequeathed  and  the  name  and  address  of  the  purchaser 
or  heir.  To  avoid  a  search  for  the  owner  through  a 
number  of  these  supplements,  a  cumulative  index  called 

365 


Practical  Real  Estate  Methods 

the  Checking  Index  is  issued  each  week.  Thus  the  first 
index  of  the  year  contains  the  first  and  second  week,  the 
second,  the  first,  second  and  third  week,  and  the  fifty- 
first  the  last  one  of  the  year,  the  whole  fifty-two  weeks 
inclusive.  After  that  a  new  real  estate  directory  is  is- 
sued. Thus  one  great  labor  existing  in  the  past  has  been 
eliminated  by  a  central  co-operative  bureau. 

A  more  comprehensive  and  more  expensive  system  is 
one  which  does  away  with  the  weekly  supplement  and 
Checking  Index,  and  reports  each  conveyance  as  it  is 
recorded  on  a  separate  filing  card.  This  card  bears  an 
abstract  of  the  title.  As  property  is  transferred  not  only 
by  conveyance  but  by  will  and  letters  of  administration, 
the  means  of  transfer  is  specified. 

List  of  Properties  on  Market 

Now  begins  the  final  work  of  the  broker.  He  must 
ascertain  in  a  general  way  what  property  in  the  terri- 
tory he  elects  to  cover  is  for  sale,  and  this  means  an 
individual  canvass,  either  by  personal  interview  or  by 
letter,  of  all  the  property  owners.  This  gives  a  general 
idea  of  his  market.  He  finds  that  almost  all  property  is 
for  sale  but  at  prohibitive  prices,  and  it  behooves  him 
to  use  the  finesse  of  his  business  to  find  out  who  really 
would  sell.  There  are  several  ways,  but  all  lead  back  to 
his  records.  One  way  is  to  see  from  the  daily  papers  who 
is  selling,  and  see  if  that  party  holds  more  property  in 
a  neighborhood  in  which  our  broker  might  interest  a 
customer.  The  alphabetical  list  of  the  Real  Estate  Di- 
rectory will  give  this  information.  Owners  who  permit 
a  "for  sale"  sign  to  be  placed  on  their  houses  are  as  a 
rule  anxious  to  sell,  and  a  broker  should  keep  a  careful 

366 


Managing  a  Real  Estate  Office 

watch  for  the  signs  of  rival  brokers,  either  through  his 
own  office  machinery,  or  by  the  aid  of  a  service  designed 
for  this  purpose  by  the  Realty  Records  Co. 

Keeping  Track  of  Mortgages 

Frequently  houses  which  are  heavily  mortgaged  at  a 
rate  of  interest  lower  than  the  prevailing  rate  at  the 
time  of  maturity  can  be  bought  or  exchanged  at  a  rea- 
sonable figure.  The  expiration  of  mortgages  should  be 
followed  up  by  the  use  of  the  Mortgage  Indication  or 
the  Record  and  Guide  Quarterly,  both  published  by  the 
Realty  Records  Co.  These  publications  and  their  use 
will  later  be  described  at  greater  length. 

New  York  System 

In  Manhattan,  brokers  who  specialize  in  the  sale  of 
property  follow  two  distinct  methods:  Either  they 
confine  themselves  to  one  locality,  thoroughly  master  all 
the  technical  conditions  existing  there,  and  supply  the 
steady  demand  for  property  in  that  neighborhood,  or  they 
follow  the  current  of  greatest  activity.  This  latter  de- 
mands a  much  higher  order  of  ability.  It  means  keeping 
one's  hands  always  on  the  pulse  of  the  market.  To  be 
successful  in  this  line  the  broker  must  know  how  to 
select  with  unerring  instinct,  the  possible  buyer — the  pro- 
fessional operator,  the  wealthy  investor,  the  man  who  has 
just  been  paid  a  mortgage  or  sold  a  house  and  thus  has 
funds  on  hand,  the  buyer  in  that  or  similar  neighbor- 
hoods. 

After  information  regarding  property  for  sale  has 
been  secured,  it  should  be  tabulated  by  means  of  a  card 
system.  Different  colored  cards  should  be  used  for  va- 

367 


Practical  Real  Estate  Methods 

rious  kinds  of  properties,  and  the  prices  should  be  clas- 
sified by  a  system  of  tabs.  For  instance,  low  priced 
properties  should  have  their  tab  on  the  left  side  of  the 
drawer,  and  progress  by  degrees  until  the  highest  priced 
properties  have  tabs  on  the  right  side  of  the  drawer. 
Thus  a  broker  can  know  at  a  glance  just  where  to  look 
for  a  particular  kind  of  property.  The  information  on 
these  cards  should  be  very  full — location,  description, 
number  of  rooms,  improvements,  condition  of  repair, 
mortgage,  purchase  money  mortgage,  rate  and  terms, 
leases  and  asking  price  with  any  particulars  known  about 
the  property  or  neighborhood. 

Possible  Purchasers  and  Tenants 

The  maintenance  of  a  file  for  possible  purchasers  is 
much  more  difficult,  as  no  exact  method  can  be  followed. 
Still,  a  list  should  be  kept,  and  a  notation  made  on  the 
card  regarding  the  nature  of  property  wanted. 

Skillfully  worded  form  letters  should  be  sent  out  con- 
stantly. It  should  be  a  part  of  the  routine  of  every 
well  conducted  real  estate  office  to  have  form  letters  go 
out  daily  to  possible  customers  or  clients;  to  a  man 
who  has  just  sold,  to  those  inheriting  property,  etc. 
This  can  safely  be  left  to  a  competent  stenographer. 

Leasing  of  property  is  much  more  of  an  exact  science. 
The  business  here  is  limited  to  vacant  places  and  par- 
ties wishing  quarters.  The  obvious  methods  of  acquiring 
a  list  of  property  is  to  tabulate  the  signs  of  other  bro- 
kers. The  Realty  Record  Co.  also  furnishes  such 
lists  and  notifies  the  subscriber  of  withdrawals  from  the 
market.  The  second  method  and  the  one  much  more 
comprehensive  in  its  scope,  is  to  tabulate  the  expiration 

368 


Managing  a  Real  Estate  Office 

of  the  leases  and  communicate  with  the  tenant  just  be- 
fore its  expiration.  This  work  is  also  being  done  for  the 
real  estate  man  by  the  Realty  Record  Co.  A  file 
for  the  expiration  of  all  leases  coming  within  his  knowl- 
edge should  be  kept  by  each  broker.  In  the  matter  of 
securing  tenants  the  broker  should  rely  on  advertising, 
and  his  own  personal  ability  to  bring  vacancies  to  the 
attention  of  tenants  in  other  buildings  whose  leases  are 
about  to  expire  and  who  would  be  obviously  benefited  by 
the  change. 


Mortgage  Brokerage 

The  mortgage  business  differs  in  many  respects  from 
selling  and  leasing  of  property.  It  resembles  leasing,  in 
the  fact  that  a  parcel  can  carry  only  so  much  mortgage, 
and  each  mortgage  has  a  given  number  of  years  to  run. 
Like  the  selling  of  property,  the  business  divides  itself 
naturally  into  clients  and  customers — the  man  with  the 
money  and  the  man  with  property  on  which  he  wishes 
to  borrow — to  find  who  has  the  money — to  get  the  ap- 
plication. 

The  Realty  Records  Co.  publishes  each  week  a 
complete  list  of  the  channels  through  which  mortgage 
money  comes.  It  behooves  each  specialist  in  the  placing 
of  mortgages  to  be  acquainted  with  such  a  list.  In  ad- 
dition the  Mortgage  Indication  issued  by  the  Realty 
Records  Co.  publishes  three  months  in  advance  of 
maturity  a  list  of  mortgages  which  fall  due,  giving  the 
channel  through  which  the  money  came  at  the  time  of 
the  placing  of  the  mortgage.  This  is  an  indication  that 
mortgage  money  may  be  obtained  from  that  source.  The 
broker  should  also  maintain  a  list  of  institutions  making 

369 


Practical  Real  Estate  Methods 

a  specialty  of  lending  money.  The  mortgage  business 
might  be  classed  under  the  following  heads:  Building 
Loans,  Replacing  Expiring  Mortgages,  First  Mortgage, 
Second  Mortgage.  The  placing  of  building  loans  in  Man- 
hattan requires  a  wide  acquaintanceship  with  the  pro- 
fessional builder.  To  replace  the  building  loan  with  a 
permanent  loan  necessitates  the  following  up  of  pro- 
jected buildings  as  listed  in  the  Record  and  Guide,  a 
weekly  paper  devoted  to  real  estate  and  building  infor- 
mation. 

Mortgage  Expirations 

The  second  grand  division  of  the  mortgage  business 
depends  on  the  knowledge  of  the  date  of  expiration  of 
existing  mortgages.  There  are  two  methods  of  following 
up  this  information,  either  for  the  broker  to  tabulate 
expirations  in  his  own  office  from  the  Record  and  Guide 
Quarterly,  or  to  purchase  lists  of  expiring  mortgages 
three  months  in  advance  of  maturity,  as  published  in 
the  Mortgage  Indicator. 

This  Mortgage  Indicator  gives  a  transcript  of  the 
instrument,  the  channel  through  which  the  money  came 
originally,  and  the  name  and  address  of  the  present 
owner  of  the  property.  The  broker  should  communicate 
with  both  the  owner  of  the  property  and  the  holder  of 
the  mortgage,  especially  when  the  rate  of  interest  on  the 
old  mortgage  differs  from  the  rate  prevailing  at  the 
date  of  maturity. 

A  careful  study  of  the  personal  idiosyncracies  of  the 
lenders  must  be  made.  Where  they  prefer  to  lend,  the 
character  of  the  property  and  rate  of  interest,  and  most 
particularly,  when  they  are  in  funds. 

370 


Managing  a  Real  Estate  Office 

Appraisal  Records 

The  daily  duty  of  every  real  estate  broker  is  to  value 
real  estate,  and  this  is  called  appraising.  There  is  but 
one  basis  of  appraising,  and  that  is  the  one  of  rental 
return.  What  rent  will  a  given  property  bring?— in 
other  words,  the  return  on  the  investment.  A  good  defi- 
nition of  an  appraisal  is  the  price  the  property  would 
bring  from  a  purchaser  who  did  not  have  to  buy  from  a 
vendor  who  did  not  have  to  sell.  Such  a  purchaser  would 
base  the  fee,  first  on  the  gross  rent  return,  and  then 
capitalize  this  rent  on  the  rate  of  interest  he  expected 
to  get  on  his  money.  For  instance,  he  expects  a  net 
return  of  ten  per  cent.  The  net  rental  is  ascertained  to 
be  $5,000.  Therefore,  $5,000  is  ten  per  cent  of  the  value 
of  the  property  which,  in  that  case,  would  be  $50,000. 
Of  the  two  things  to  determine,  net  rental  and  rate  of 
interest  to  expect,  net  rental  is  the  easiest.  But  that 
entails  a  thorough  knowledge  of  existing  conditions, 
rentals  in  similar  properties,  percentage  of  vacancies, 
cost  of  repairs  and  running  expenses.  Rate  of  interest 
is  much  harder  to  determine,  and  is  governed  entirely 
by  the  rate  of  interest  secured  by  adjacent  or  similar 
property  owners,  which  brings  the  appraiser  back  in  a 
circle  to  the  market  price  of  the  property.  This  is  almost 
wholly  determined  by  what  other  and  similar  property 
has  sold  for,  or  the  price  at  which  like  property  is  held. 
Again  the  great  value  of  records — First,  legal  sales,  as 
published  and  compared  in  various  publications  of  the 
Record  and  Guide,  and  the  Realty  Records  Co.;  sec- 
ond, the  broker's  own  knowledge  of  prices  secured; 
third,  the  varying  conditions  surrounding  each  parcel 
of  property. 

371 


Practical  Real  Estate  Methods 

In  appraising  vacant  property,  the  appraiser  must  first 
imagine  an  adequate  improvement  on  the  property,  de- 
termine its  value  from  similar  properties,  as  explained 
above,  subtract  the  cost  of  erecting  the  building  from  the 
total,  which  will  give  the  value  of  the  vacant  land. 

A  very  rough  method  of  appraisal  is  to  take  the  valua- 
tion placed  upon  it  by  the  city  in  the  tax  assessments 
(which  are  published  in  the  City  Record)  and  add  ten 
per  cent  or  twenty  per  cent. 

There  are  boom  times  in  real  estate  and  periods  of 
comparative  stagnation,  but  all  the  time  there  is  some 
buying,  some  mortgaging  and  some  renting.  The  real 
estate  man  who  understands  the  proper  use  of  records 
is  seldom  or  never  without  some  promising  deal  on  hand, 
and  is  enabled  to  pick  and  choose  the  very  remunerative 
deals  on  the  flood  tide  of  prosperity. 


372 


OLD  NEW  YORK  AS  KNOWN  BY  A 
REAL  ESTATE  PIONEER 


E.  A.  CRUIKSHANK 

WHAT  wonderful  changes  has  this  city  seen,  and 
how  it  has  grown!  I  can  remember  when 
Castle  Garden,  now  the  Aquarium,  could  be 
reached  only  by  a  long  bridge,  as  it  was  far  away  from 
the  shore  and  surrounded  by  water.  Going  back  to  my 
father's  time,  there  were  no  Washington  or  West  Streets, 
and  the  bowsprits  of  the  ships  used  to  stick  over  the 
yard  of  the  house  which  fronted  on  Greenwich  Street. 
There  were  no  steamboats  then.  The  only  way  to  reach 
Brooklyn  was  by  means  of  a  periagua,  or  small  sailing 
vessel.  There  was  good  gunning  on  Brooklyn  Heights, 
and  my  father  shot  many  a  bird  there. 

Everything  in  New  York  was  equally  primitive.  The 
only  water  supply  was  the  old  pump  on  the  corner. 
There  were  no  sewers — only  open  gutters,  and  the  pigs 
used  to  wander  down  Beaver  Lane,  now  known  as  Morris 
Street,  acting  as  scavengers.  There  were  no  railroads, 
telegraphs,  telephones,  street-cars,  bridges.  If  you 
wanted  some  wood  cut,  the  old  colored  men  used  to  come 
around  with  buck  and  saw  and  cut  it  in  front  of  the 
house.  The  city  was  very  small,  and  its  court  end,  where 
the  finest  residences  were,  was  in  front  of  the  Bowling 
Green  and  the  Battery  and  on  Broadway  and  Greenwich 
Street. 

373 


Practical  Real  Estate  Methods 

The  rear  part  of  the  City  Hall  was  finished  in  an  in- 
ferior manner  to  the  front,  for  the  reason  that  it  was 
so  far  uptown  that  it  was  supposed  the  city  never  would 
grow  beyond  it.  The  site  of  the  Tombs  was  a  good 
fishing  pond;  through  Canal  Street  ran  a  wide  stream 
that  it  seemed  almost  impossible  to  fill.  The  country 
seats  and  farms  lay  beyond.  To  show  the  marvelous 
growth  of  the  city,  the  president  of  one  of  the  largest 
downtown  banks  bought  a  country  place  for  himself  and 
family  (this  was  before  Central  Park  was  thought  of) 
running  from,  I  think,  52d  Street  to  66th  Street,  and 
from  Fifth  to  Fourth  Avenues — as  Madison  Avenue  was 
not  in  existence — for  $40,000,  and  his  friends  criticized 
him  and  condoled  with  his  family  at  such  a  wild  and 
crazy  investment  of  so  large  an  amount  of  money  for 
such  a  far-away  piece  of  land.  His  only  answer  was, 
"While  I  will  not  derive  any  benefit  from  the  invest- 
ment, my  grandchildren  will."  But  even  he  did  not 
realize  the  wonderful  changes  that  were  coming.  I 
offered,  not  to  a  grandchild,  but  one  of  his  children, 
$1,000,000  for  the  block  front  on  Fifth  Avenue  between 
only  two  of  the  streets  and  only  100  feet  deep,  and  you 
can  figure  out  what  the  farm  had  then  become  worth. 

I  myself  can  remember  the  old  Crystal  Palace  that 
stood  on  the  plot  now  called  Bryant  Park,  between  4Oth 
and  42d  Streets.  On  the  opposite  side  of  Sixth  Avenue 
stood  a  row  of  two-story  buildings  occupied  as  stores, 
and  when  the  Crystal  Palace  burned  down,  all  the  shop- 
keepers were  ruined  and  the  stores  stood  idle  for  a  long 
time,  for  it  was  so  far  uptown  scarcely  anyone  ever  came 
there.  There  was  no  fire  department  in  those  days,  but 
first  the  bucket  brigade,  and  then  the  hand  engine,  with 
its  long  arms,  easy  at  first  under  the  excitement,  but 

374 


Old  New  York 

growing  harder  every  minute,  drawing  the  water  out  of 
the  few  cisterns  that  were,  or  if  happily  close  to  the  shore, 
tapping  the  rivers. 

But  few  courts  then  and  justice  was  quicker!  The 
murderer  on  the  day  set  for  his  execution  was  brought 
out,  his  coffin  placed  on  a  truck,  and  he  was  seated  on 
his  coffin,  and  guarded  on  either  side.  The  procession 
passed  up  Broadway  to  the  gallows,  where  he  was 
hanged  in  open  sight  of  all,  as  a  warning  to  evildoers. 

The  winters  seemed  to  be  colder,  not  only  the  East  but 
also  the  North  River  was  frozen  over,  and  at  times  so 
hard  and  so  thick  was  the  ice  that  a  barbecue  would  be 
held  and  an  ox  roasted  on  the  frozen  waters. 

How  all  has  changed!  Whereas  the  best  real  estate 
agent  then  would  have  died  of  starvation  if  he  had  had 
only  his  commissions  to  buy  his  food  and  lodging  or 
support  his  family,  now  a  lucrative  business  awaits  him 
if  he  but  brings  the  brains,  the  honesty  and  the  perse- 
verance which  are  necessary  for  success  in  any  other  pro- 
fession. The  small  three-story  or  possibly  four-story 
houses  are  gone,  and  the  eight,  ten,  twelve,  and  so  on, 
up  to  the  thirty-story  skyscrapers,  have  taken  their  places, 
with  elevators,  electric  lights,  filtered  and  cooled  water, 
etc.,  with  an  army  of  employees,  superintendents,  engi- 
neers, electricians,  porters,  scrub  women  and  elevator 
boys.  With  all  the  facilities  of  travel — trolleys,  elevated 
roads,  subways,  bridges,  tunnels — with  values  changing 
from  hundreds  to  hundreds  of  thousands  or  even  mil- 
lions, with  the  city  constantly  expanding,  the  real  estate 
man  versed  in  his  business  is  the  right  hand  adviser  of 
the  rich  investor  or  the  vast  corporation  in  regard  to 
the  advisability  of  their  investments  in  real  estate,  the 
desirability  of  their  loans  on  bond  and  mortgage,  the 

375 


Practical  Real  Estate  Methods 

settling  of  how  they  may  obtain  the  best  returns  from 
the  money  to  be  expended  or  loaned.  Gentlemen,  you 
have  chosen  a  profession  in  which  you  can  be  ever  learn- 
ing. If  you  have  already  learned  somewhat  of  building, 
plumbing,  electrical  work,  engineering,  architecture,  etc., 
so  much  the  better.  You  will  also  find  it  both  pleasant 
and  necessary  to  watch  the  growth  of  the  city,  the  chang- 
ing of  its  various  lines  of  business  from  one  quarter  to 
another,  the  extension  of  its  dwelling  facilities,  and  from 
the  lessons  of  old  New  York,  forecast  the  future  of  the 
new. 


376 


DAVIES  AND  HOFFMAN  RULES 


WILLIAM  E.  DAVIES 

Hoffman  Rule  and  Its  Defects—Davits  Rule  for 
Valuing  Lots  Differing  in  Depth  or  Width  from 
Standard  Lots — How  to  Compute  Corner  Values  with 
the  Table — Foreclosure  Sales  No  Criterion  of  Value 
—Plottage 

HOFFMAN  RULE 


Lot  Ft 

Value 

Aggregate 
per  cent 

Lot  Ft. 

Value 

Aggregate 
per  cent 

25x100 

$1,000 

55x25 

$715 

71.50 

lOx  25 

160 

16 

60x25 

760 

76 

15x  25 

235 

23.50 

65x25 

800 

80 

20x  25 

310 

31 

70x25 

840 

84 

25x  25 

375 

37.50 

75x25 

875 

87.50 

30x  25 

440 

44 

80x25 

910 

91 

35x  25 

500 

50 

85x25 

935 

93.50 

40x  25 

560 

56 

90x25 

960 

96 

45x  25 

615 

61.50 

95x25 

980 

98 

50x  25 

670 

67 

100x25 

1,000 

100 

REGARDING  the  Hoffman  rule,  the  compiler  has  in 
the  past  used  same  in  many  cases,  its  application 
having  been  stipulated  by  both  parties  in  several 
proceedings,  but  a  long  and  very  varied  experience  in 
making  appraisals  as  a  real  estate  expert  has  impressed 
upon  him  its  frequent  inconsistency  and  the  necessity 
of  devising  some  logical  method  of  valuing  lots  more  or 
less  than  one  hundred  feet  in  depth. 

After  studying  10,200  sales  and  ascertaining  the  av- 
erage values  of  lots  of  different  depths,  the  compiler 
adopted  the  following  equation  of  the  parabola  in  which 
Y  =  the  proportion  of  value  of  lot  in  question  to  value 

377 


Practical  Real  Estate  Methods 

of  full  lot,  and  X  =  the  proportion  of  depth  of  lot  in 
question  to  depth  of  full  lot  (100  feet). 
Formula  of  Davies  rule: 


Y  =  V  MS  (X  +  .0352)  —  .226 

This  formula  has  been  tested  in  several  hundred  ap- 
praisals and  found  invariably  to  produce  a  satisfactory 
result. 

It  has,  moreover,  the  inestimable  advantage  that  it  can 
be  applied  to  lots  of  any  depth  and  not  alone  to  strips 
varying  five  feet  in  depth  within  the  limit  of  IOO  feet, 
as  is  the  case  with  the  Hoffman  rule. 

Corner  Lots 

Let  us  suppose  that  a  corner  lot  is  25x50  and  that 
the  standard  inside  lot  25x100  is  worth  $1,000.  The 
ratio  for  the  depth  of  fifty  feet  as  given  in  the  table 
is  .654.  Corners  in  this  neighborhood  are  worth  fifty 
per  cent  more  than  inside  lots.  This  does  not  mean 
that  $327  (50%  of  $654)  is  to  be  added  to  the  $654 
given  as  the  ratio  for  depth.  Merely  the  ratio  of  50% 
is  to  be  added.  Fifty  per  cent  of  .654  is  .327.  This 
gives  the  value  of  the  corner  as 

$654  +  32.7%  =  $868 

the  proper  value  of  a  corner  25x50. 

For  depths  with  parts  of  foot  or  more  than  200  feet, 
or  where  greater  accuracy  is  desired  than  three  places 
of  decimals,  use  the  formula  in  which  Y  =  the  pro- 
portion of  value  of  lot  in  question  to  value  of  standard 
lot,  and  X  =  the  proportion  of  depth  of  lot  in  question 
to  depth  of  standard  lot: 

Y  =  V  145  (X  +  .0352)  —  .226 
378 


Davies  and  Hoffman  Rules 


DA  VIES  RULE 

Table  for  Estimating  the  Value  of  Strips  of  Lot  up 
to  25x200 

(Deduced  from  the  mean  of  thousands  of  actual  sales) 


Depth 

Ratio 

Depth 

Ratio 

Depth 

Ratio 

Depth 

Ratio 

1 

.030 

51 

.662 

101 

1.006 

151 

1.267 

2 

.057 

52 

.670 

102 

1.012 

152 

1.272 

3 

.082 

53 

.678 

103 

1.018 

153 

1.277 

4 

.105 

54 

.686 

104 

1.024 

154 

1.282 

5 

.126 

55 

.694 

105 

1.030 

155 

1.287 

6 

.146 

56 

.702 

106 

1.036 

156 

1.292 

7. 

.165 

57 

.710 

107 

1.042 

157 

1.297 

8 

.183 

58 

.718 

108 

1.048 

158 

1.302 

9 

.200 

59 

.726 

109 

1.054 

159 

1.307 

10 

.217 

60 

.734 

110 

1.060 

160 

1.312 

11 

.233 

61 

.742 

111 

1.066 

161 

1.317 

12 

.248 

62 

.750 

112 

1.072 

162 

1.322 

13 

.263 

63 

.757 

113 

1.077 

163 

1.327 

14 

.278 

64 

.764 

114 

1.082 

164 

1.332 

15 

.292 

65 

.771 

115 

1.087 

165 

1.337 

16 

.306 

66 

.778 

116 

1.092 

166 

1.342 

17 

.319 

67 

.785 

117 

1.097 

167 

1.347 

18 

.332 

68 

.792 

118 

1.102 

168 

1.352 

19 

.345 

69 

.799 

119 

1.107 

169 

1.357 

20 

.358 

70 

.806 

120 

1.112 

170 

1.362 

21 

.370 

71 

.813 

121 

1.117 

171 

1.367 

22 

.382 

72 

.820 

122 

1.122 

172 

1.372 

23 

.394 

73 

.827 

123 

1.127 

173 

1.377 

24 

.406 

74 

.834 

124 

1.132 

174 

1.382 

25 

.417 

75 

.841 

125 

1.137 

175 

1.387 

26 

.428 

76 

.848 

126 

1.142 

176 

1.392 

27 

.439 

77 

.855 

127 

1.147 

177 

1.397 

28 

.450 

78 

.862 

128 

1.152 

178 

1.402 

29 

.461 

79 

.869 

129 

1.157 

179 

1.407 

30 

.471 

80 

.876 

130 

1.162 

180 

1.412 

31 

.481 

81 

.883 

131 

1.167 

181 

1.416 

32 

.491 

82 

.890 

132 

1.172 

182 

1.420 

33 

.501 

83 

.897 

133 

1.177 

183 

1.424 

34 

.511 

84 

.904 

134 

1.182 

184 

1.428 

35 

.521 

85 

.910 

135 

1.187 

185 

1.432 

36 

.531 

86 

.916 

136 

1.192 

186 

1.436 

37 

.541 

87 

.922 

137 

1.197 

187 

1.440 

38 

.550 

88 

.928 

138 

1.202 

188 

1.444 

39 

.559 

89 

.934 

139 

1.207 

189 

1.448 

40 

.568 

90 

.940 

140 

1.212 

190 

1.452 

41 

.577 

91 

.946 

141 

1.217 

191 

1.456 

42 

.586 

92 

.952 

142 

1.222 

192 

1.460 

43 

.595 

93 

.958 

143 

1.227 

193 

1.464 

44 

.604 

94 

.964 

144 

1.232 

194 

1.468 

45 

.613 

95 

.970 

145 

1.237 

195 

1.472 

46 

.622 

96 

.976 

146 

1.242 

196 

1.476 

47 

.630 

97 

.982 

147 

1.247 

197 

1.480 

48 

.638 

98 

.988 

148 

1.252 

198 

1.484 

49 

.646 

99 

.994 

149 

1.257 

199 

1.488 

50 

.654 

100 

1.000 

150 

1.262 

200 

1.492 

Example — To  find  the  value  of  lot  110  feet  deep,  if  standard 
inside  lot  is  worth  $75,000,  multiply  75,000  by  1.06  =  $79,500. 

379 


Practical  Real  Estate  Methods 


Table  of  Percentages  for  Lots  More  or  Less  than 
25  Feet  Wide 


Width 

Percentage 

Width 

Percentage 

Width 

Percentage 

12.6 

.50 

19.0 

.76 

24.0 

.96 

13.0 

.52 

19.9J4 

.79 

24.11 

.996666 

14.0 

.56 

20.0 

.80 

25.5 

1.016666 

15.0 

.60 

20.11 

.836666 

25.8J4 

.028333 

15.10J4 

.635 

21.0 

.84 

25.11 

.036666 

16.0 

.64 

21.054 

.841666 

26.7J4 

.065 

16.8 

.666666 

21.6 

.86 

27.2 

.086666 

17.0 

.68 

22.0 

.88 

28.3 

.13 

17.3J4 

.690832 

22.0*6 

.882083 

30.1154 

.238333 

18.0 

.72 

22.6 

.90 

33.4 

.333333 

18.9 

.75 

23.9 

.92 

37.6 

.5 

18.11 

.756666 

23.0 

.95 

40.0 

1.6 

Example — If  lot  is  100  feet  deep,  multiply  value  of 
standard  lot  by  percentage  opposite  width. 

If  more  or  less  than  100  feet  deep,  multiply  result 
obtained  by  Davies  rule  by  percentage  opposite  width. 

Divide  value  of  lot  25  feet  wide  and  more  or  less  than 
loo  feet  deep  by  Davies  rule  ratio  and,  if  more  or  less 
than  25  feet  wide,  by  width  percentage  in  addition,  to 
arrive  at  value  of  standard  lot. 

To  ascertain  percentage  added  to  inside  lot  to  obtain 
value  of  corner  lot,  divide  difference  by  value  of  inside 
lot. 

To  find  percentage  of  inside  lot  of  corner  lot,  divide 
value  of  inside  lot  by  value  of  corner  lot. 

The  percentage  deducted  from  corner  lot  to  fix  value 
of  inside  lot  is  the  result  of  difference  divided  by  value 
of  corner  lot. 

Value  per  square  foot  of  standard  lot,  25x100,  can  be 
found  by  multiplying  value  by  four  and  marking  off 
four  figures,  and  value  per  front  foot  by  same  method 
and  marking  off  two  figures. 

380 


Davies  and  Hoffman  Rules 

When  the  value  per  square  foot  of  standard  lot  is 
given,  its  full  value  is  value  per  square  foot  divided 
by  four  with  four  figures  added. 

To  extract  plottage,  divide  by  one  plus  added  per- 
centage. 

To  analyze  sale,  if  all  standard  lots,  assuming  a  key 
lot  to  be  worth  ten  per  cent  and  a  corner  sixty  per  cent 
more  than  an  inside  lot,  multiply  the  price  less  plottage 
by  I  for  an  inside  lot,  i.i  for  a  key  lot,  and  1.6  for  a 
corner,  and  divide  each  result  by  the  sum  of  the  units. 
When  the  lots  are  not  of  standard  depth,  the  units  will 
be  the  figures  given  in  Davies  rule,  plus  the  added  per- 
centage for  key  and  corner  lots,  and,  if  more  or  less 
than  25  feet  wide,  the  product  of  same  and  the  width 
percentage. 

Foreclosure  Sales 

Foreclosure  sales  are  no  criterion  of  values  'for  the 
following  reasons: 

First — Prospective  bidders  are  well  aware  of  the  fact 
that  the  auction  is  not  really  an  open  one  to  the  highest 
bona  fide  bidder,  as  the  mortgagees  and  other  lienors 
will,  in  all  probability,  bid  up  to  the  amount  of  their 
respective  claims,  which  are  only  publicly  advertised  in 
the  case  of  liens  prior  to  that  under  which  the  sale  is 
authorized,  subsequent  liens  not  being  disclosed,  whereas 
other  judicial  sales  are  almost  invariably  absolute,  posi- 
tive, peremptory  and  without  reserve  or  upset  price, 
thus  encouraging  buyers  to  bid  against  each  other. 

Second — In  foreclosure  sales  the  referee  has  to  require 
payment  in  cash,  while  in  partition,  executors'  and 
trustees'  sales,  it  is  very  common  to  state  in  the  adver- 

381 


Practical  Real  Estate  Methods 

tisement  that  a  large  percentage  can  remain  on  bond 
and  mortgage  at  a  low  rate  of  interest,  if  desired,  and 
also  to  furnish  title  insurance  policies  free  of  cost. 

Third — It  is  the  general  impression  of  the  real  estate 
fraternity  that  it  is  much  easier  to  deal  with  a  mortgagee 
after  he  has  bid  in  the  property,  as  time  is  allowed  for 
negotiations,  and  easy  terms  can  probably  be  arranged. 

General 

Whenever  land  increases  rapidly  in  value,  although  it 
may  seem  somewhat  anomalous,  the  rental  value  of  the 
buildings  several  years  old  decreases  materially,  on  ac- 
count of  the  necessary  demolition  of  older  buildings  and 
the  construction  of  adequate  improvements  with  which 
the  first  mentioned  cannot  successfully  compete. 

It  is  generally  recognized  in  real  estate  circles,  and 
could  not  well  be  otherwise,  that  when  land  and  build- 
ings are  purchased  and  the  latter  torn  down  in  order 
to  make  way  for  a  more  adequate  improvement,  the 
value,  if  any,  of  the  structure  so  demolished  is  merged 
in  the  cost  of  the  land. 

Plottage 

Plottage  is  an  added  percentage  to  the  aggregate  value 
of  two  or  more  contiguous  lots  held  in  one  ownership 
and  attaches  when  vacant  or  covered  by  a  single  struc- 
ture. Where  there  are  separate  buildings  on  the  lots 
and  plottage  is  claimed,  full  value  cannot  be  allowed 
for  the  buildings.  (73  App.  Div.,  152.) 


382 


Davies  and  Hoffman  Rules 

LEASE  TABLES 

Table  for  the  Purchasing  of  Leases,  for  the  Terms  of  Years 

Certain  at  Rates  from  4  to  10  per  cent  Interest  Which 

the  Purchaser  May  Thereby  Make  of  His  Money 


4% 

•d 


*y2%     s% 

4>  W 

"«  8       *  S 


7% 


9% 


10% 


8*8      11 


.  % 

il 


1» 

*£ 

*A 

*£ 

*& 

*& 

*£ 

^ 

*£ 

y* 

490 

.489 

.488 

485 

AQ  1 

A  *7/C 

i 

.     .962 

'.957 

'.952 

'.943 

'.935 

•  *TOl 

.926 

'.917 

.4/O 

.909 

1-54. 

.   1.442 

1.435 

1.428 

1.414 

1.401 

1.388 

1.374 

1.362 

2 

.   1.886 

1.873 

1.859 

1.833 

1.808 

1.783 

1.759 

1.736 

2—y2. 

.  2.357 

2.340 

2.323 

2.290 

2.258 

2.226 

2.195 

2.165 

3 

.   2.775 

2.749 

2.723 

2.673 

2.624 

2.577 

2.531 

2.487 

3—54. 

.   3.236 

3.205 

3.175 

3.115 

3.057 

3.001 

2.946 

2.893 

4 

.  3.630 

3.588 

3.546 

3.465 

3.387 

3.312 

3.240 

3.170 

4-54. 

.  4.081 

4.033 

3.985 

3.893 

3.804 

3.718 

3.634 

3.554 

5 

.   4.452 

4.390 

4.329 

4.212 

4.100 

3.993 

3.890 

3.791 

5—  J4. 

.   4.893 

4.825 

4.757 

4.626 

4.501 

4.380 

4.264 

4.153 

6 

.   5.242 

5.158 

5.076 

4.917 

4.767 

4.623 

4.486 

4.355 

6—54  . 

.   5.674 

5.582 

5.492 

5.317 

5.151 

4.993 

4.841 

4.697 

7 

.    6.002 

5.893 

5.786 

5.582 

5.389 

5.206 

5.033 

4.868 

7—54. 

.   6.425 

6.306 

6.191 

5.969 

5.759 

5.559 

5.370 

5.190 

8 

.   6.733 

6.596 

6.463 

6.210 

5.971 

5.747 

5.535 

5.335 

8—54. 

.   7.146 

6.999 

6.856 

6.583 

6.326 

6.083 

5.854 

5.637 

9 

.   7.435 

7.269 

7.108 

6.802 

6.515 

6.247 

5.995 

5.759 

9-54. 

.   7.839 

7.661 

7.489 

7.162 

6.855 

6.567 

6.297 

6.043 

10 

.  8.111 

7.913 

7.722 

7.360 

7.024 

6.710 

6.418 

6.145 

10—54. 

.   8.506 

8.295 

8.092 

7.708 

7.349 

7.015 

6.702 

6.411 

11 

.  8.760 

8.529 

8.306 

7.887 

7.499 

7.139 

6.805 

6.495 

11—54. 

.  9.146 

8.901 

8.666 

8.222 

7.810 

7.428 

7.074 

6.744 

12 

.  9.385 

9.119 

8.863 

8.384 

7.943 

7.536 

7.161 

6.814 

12—54. 

.  9.762 

9.481 

9.212 

8.707 

8.241 

7.811 

7.414 

7.047 

13 

.  9.986 

9.683 

9.394 

8.853 

8.358 

7.904 

7.487 

7.103 

13—54. 

.10.353 

10.036 

9.732 

9.164 

8.643 

8.165 

7.726 

7.322 

14 

.10.563 

10.223 

9.899 

9.295 

8.745 

8.244 

7.786 

7.367 

14—54. 

.10.922 

10.566 

10.227 

9.594 

9.018 

8.492 

8.011 

7.571 

15 

.11.118 

10.740 

10.380 

9.712 

9.108 

8.559 

8.061 

7.606 

15—54. 

.11.469 

11.074 

10.698 

10.000 

9.368 

8.794 

8.272 

7.796 

16        . 

.11.652 

11.234 

10.838 

10.106 

9.447 

8.851 

8.313 

7.824 

16—54. 

.11.994 

11.559 

11.146 

10.383 

9.695 

9.074 

8.511 

8.001 

17 

.12.166 

11.707 

11.274 

10.477 

9.763 

9.122 

8.544 

8.022 

17—54. 

.12.499 

12.023 

11.573 

10.744 

10.000 

9.332 

8.731 

8.187 

18 

.12.659 

12.160 

11.690 

10.828 

10.059 

9.372 

8.756 

8.201 

18—54. 

.12.985 

12.467 

11.979 

11.084 

10.285 

9.571 

8.931 

8.356 

19         . 

.13.134 

12.593 

12.085 

11.158 

10.336 

9.604 

8.950 

8.365 

19—54. 

.13.451 

12.891 

12.365 

11.404 

10.551 

9.792 

9.115 

8.509 

20         . 

.13.590 

13.008 

12.462 

11.470 

10.594 

9.818 

9.129 

8.514 

20—54. 

.13.900 

13.298 

12.733 

11.706 

10.800 

9.997 

9.283 

8.647 

21 

.14.029 

13.405 

12.821 

11.764 

10.836 

10.017 

9.292 

8.649 

21—54. 

.14.331 

13.686 

13.083 

11.991 

11.031 

10.185 

9.437 

8.772 

22 

.14.451 

13.784 

13.163 

12.042 

11.061 

10.201 

9.442 

8.773 

22—54. 

.14.745 

14.058 

13.417 

12.259 

11.248 

10.360 

9.578 

8.883 

23          . 

.14.857 

14.148 

13.489 

12.303 

11.272 

10.371 

9.580 

8.887 

23—54. 

.15.143 

14.413 

13.734 

12.512 

11.450 

10.521 

9.707 

8.985 

24 

.15.247 

14.495 

13.799 

12.550 

11.469 

10.529 

9.707 

8.991 

24—54. 

.15.526 

14.753 

14.036 

12.751 

11.638 

10.671 

9.823 

9.077 

25          . 

.15.622 

14.828 

14.094 

12.783 

11.654 

10.675 

9.826 

9.084 

383 


Practical  Real  Estate  Methods 

Assuming  a  lease  of  ten  years  producing  a  net  income 
of  $1,000,  the  value  of  same,  if  rent  is  payable  monthly, 
will  be,  on  a  six  per  cent  basis,  $1,000  x  7.360  (table), 
$7,360  x  1.02721  (constant  factor,  tab'e  below)  or 
$7,560.26. 


Constant  Factors  for  Converting  Values  and  Amounts 

of    Yearly    Leases    into    Those    of    Leases 

for  One  Year,  Payable  Half-yearly, 

Quarterly,    and    Monthly 


Yearly 
Rates 

.01 
.0125 
.015 
.0175 

.02 
.0225 
.025 
.0275 

.03 

.0325 

.035 

.0375 


.05 
.06 

.07 
.08 
.09 
.10 


Half-yearly 
Factors 

1.00249 
1.00312 
1.00374 
1.00436 

1.00497 
1.00559 
1.00621 
1.00683 

1.00744 
1.00806 
1.00867 
1.00929 

1.00990 

1.01113 
1.01235 
1.01478 

1.01720 
1.01961 
1.02201 
1.02440 


Quarterly 
Factors 

.00377 
.00469 
.00563 
.00650 

.00747 
.00841 
1.00933 
1.01025 

1.01118 
1.01211 
1.01303 
1.01395 

1.01488 
.01672 
.01856 
.02223 

.02588 
.02952 
.03314 
1.03676 


Monthly 
Factors 

1.00460 
1.00572 
1.00685 
1.00799 

1.00914 
1.01027 
1.01142 
1.01254 

1.01368 
1.01482 
1.01594 
1.01707 

1.01820 
1.02046 
1.02271 
1.02721 

1.03169 
1.03616 
1.04061 
1.04504 


384 


BROKERS'  AND  AUCTIONEERS' 
COMMISSIONS 

THE  following  table  of  commissions  is  that  adopted 
by  the  Real  Estate  Board  of  Brokers  of  New 
York  and  published  in  its  official  Year  Book. 

Regulations  as  to  Private  Sales 

The  following  commissions  shall  be  chargeable  on 
private  sales,  except  where  a  special  contract  has  been 
previously  made: 

Per 

Cent. 

ist.  For   selling  real   estate   within   the   limits  of 

New  York  and  Brooklyn I 

Leaseholds    2 

2d.    For  selling  real  estate  in  the  suburbs  of  New 

York,  Brooklyn  and  country  property 2,^/2 

3d.    Western  and  Southern  lands 5 

4th.  Selling  leases  and  leaseholds  in  the  suburbs  of 

New  York 5 

5th.  Procuring  loans,  i  per  cent,  or  by  agreement. 

In  the  case  of  exchanges,  a  full  commission  shall  be 
paid  on  each  side.  No  sales  shall  be  made  for  a  com- 
mission of  less  than  $25. 

Should  the  title  of  property  prove  imperfect,  whereby 
a  sale  cannot  be  consummated,  the  claim  for  commis- 
sions shall  not  be  invalidated  thereby. 

Brokerage  shall  be  deemed  to  be  earned  when  the 
price  and  terms  are  arranged  between  buyer  and  seller, 

385 


Practical  Real  Estate  Methods 

the  minds  of  both  parties  having  fully  met.     It  shall  be 
due  and  payable  when  the  contract  is  signed. 

Regulations  as  to  Agents  and  Management  of  Property 

The  following  commissions  shall  be  charged  for  the 
management  and  letting  of  property,  except  where  a 
special  contract  has  previously  been  made: 

Per 

Cent. 

Renting  for  a  term  under  three  years  on  first  year's 

rental  or  fraction  thereof 2^2 

Renting  for  less  than  one  year,  by  special  agree- 
ment. 
Leasing  for  a  term  of  three  years  and  upward,  on 

gross  rental,  except  by  special  agreement I 

Leasing  country  property,  first  year 5 

Each  subsequent  year,  to  same  party ". 2j£ 

On  renting  and  collecting,  except  by  special  agree- 
ment       5 

Appraisement  Charges 

For  appraising  real  estate  in  the  Boroughs  of  Man- 
hattan, Bronx  and  Brooklyn,  from  $10  to  ^  of  I  per 
cent  upon  valuation,  or  according  to  agreement. 

Suburban  property,  ^  of  I  per  cent,  or  according 
to  agreement. 

NEW  YORK  AUCTION  FEES 

The  following  regulations  governing  the  fees  for  auc- 
tioning real  estate  are  those  adopted  by  the  Real  Estate 
Auctioneers'  Association  of  the  City  of  New  York: 


Brokers'  and  Auctioneers'  Commissions 

Regular  Salesroom  Fees 

Knockdowns  on  all  real  estate   $  5.00 

Auctioneers  not  renting  stands  to  pay  double  rate  10.00 

Legal  Sales  Fees 

Knockdowns  on  all  sales  of  real  estate  by  order  of 

the  court $  2.00 

Salesroom  fees  on  property  offered  at  upset  prices 
shall  be  the  same  as  if  sold.  In  all  cases  where  property 
is  offered  at  an  upset  price  and  not  sold,  or  where  the 
property  is  bid  in  by  the  owner,  or  on  his  behalf,  the 
auctioneer  shall  so  inform  the  manager  immediately  after 
the  sale. 

Commissions  on  Auction  Sales 

Commissions  on  sales  of  real  estate  shall  be  as  fol- 
lows, ins.:  On  New  York  and  Brooklyn  property,  not 
less  than  j£  of  I  per  cent,  to  be  paid  by  the  seller  in 
addition  to  the  expense  of  maps,  advertising  and  sales- 
room fees ;  and  no  member  of  the  association  shall  be 
allowed  to  divide  this  commission  with  any  person  except 
a  real  estate  broker  bringing  a  sale  direct. 

On  country  property  and  leasehold  property,  wherever 
situated,  the  commission  shall  be  not  less  than  I  per  cent, 
to  be  paid  by  the  seller  in  addition  to  the  expense  of 
maps,  advertising,  and  salesroom  fees. 

The  purchaser  shall  also  pay  the  auctioneer's  fee  of 
$20  on  each  numbered  lot,  except  on  sales  of  property 
producing  less  than  $1,000,  when  the  fee  shall  not  be 
less  than  $10  on  each  lot. 

All  legal  sales  shall  be  at  the  legal  rate,  vis.:  $15 
auction  fee  and  $2  salesroom  fee,  to  be  paid  by  the 
purchaser. 

387 


Practical  Real  Estate  Methods 

The  auctioneer  shall  be  entitled  to  his  commission  on 
any  real  estate  advertised  by  him  and  sold  by  the  owner 
previous  to  the  day  of  sale,  the  same  as  if  sold  at 
auction. 

Brooklyn  Auction  Fees 

The  following  regulations  governing  exchange  and 
auction  are  those  adopted  by  the  Brooklyn  Real  Estate 
Exchange : 

Exchange  Fees 

Knockdown  on  real  estate  to  auctioneers  renting 

stands  $  2.00 

Knockdown  on  real  estate  to  auctioneers  not 

renting  stands  6.00 

Knockdown  on  all  sales  of  real  estate  by  order  of 

the  court  2.00 

Auctioneers'  stands,  terms  per  annum,  from  May 

i,  payable  in  advance  quarterly  100.00 

Commission  on  Auction  Sales  to  Be  Paid  by  Buyer  and  Seller 

The  commission  on  auction  sales  of  real  estate  shall 
be  as  follows,  viz.:  On  New  York  and  Brooklyn  prop- 
erty, y*.  of  I  per  cent,  and  on  country  property,  i  per 
cent,  to  be  paid  by  the  seller,  in  addition  to  the  expense 
of  maps,  advertising  and  salesroom  fees.  The  pur- 
chaser shall  also  pay  the  auctioneer's  fee  of  not  less 
than  fifteen  dollars,  except  on  sales  of  property  pro- 
ducing less  than  $1,000,  when  the  fee  shall  not  be  less 
than  ten  dollars  on  each  lot.  All  legal  sales  shall  be 
at  the  legal  rates,  vis.:  fifteen  dollars  auction  fee  and 
two  dollars  salesroom  fees,  to  be  paid  by  the  purchaser. 


INDEX 


PAGE 

A 

Acreage 

Architect's  Place  in 362 

Developing   355-362 

Landscaping  of  359 

Natural     Features  —  How    to 

Preserve   359 

Operating  in    244 

Physical  Treatment  of 360 

Service  Lines  and  Developing  355 

Shrubs    for    357 

Sidewalks  for    357 

Straight  Lines  Avoided 361 

Streets,   How  to   Lay   Out...   356 

Tree  Planting   356 

Utilitarian   Features  and 359 

Advertising 

Brain   Impressions   in 11 

Choice  of  Medium 11 

Concentration  in   12 

Copy    11 

Honesty  in    12 

Test  of   11 

Value  of  High   Buildings  in       79 
Agent       (See    also    Tenements, 
Loft    Buildings    and    Office 
Buildings.') 

Acts  of — and  Principal 28 

And  Architect 63,  72,  362 

And  Tenant 59,  71,  79 

Methods  of    57 

Owner  and    54,  72 

Alvord,  Dean 355-362 

Apartments  (See  Tenements.) 
Appraisals  (See  also  Broker- 
age, Buildings,  Building 
Loans,  Condemnation,  Da- 
vies  Rule,  Expert  Testi- 
mony, Loft  Buildings,  Office 
Buildings,  Water  Front.) 

Appraisal   Committee    121 

Buildings    86,  92-118 

Capitalizing  Rents 5,  87, 

112,  198 

Commissions  for    386 

Corner  Lots 85,  173,  378 


PAGE 

Appraisals — Continued 

Cubic  Contents  and 165,  213 

Davies  Rule 377-382 

Economic  Factors  of  Value..   238 
Examples.. 83,  84,  87,  89,  90,     91 

Floor  Area  as  Factor 175 

Foreclosure     Sales     No     Cri- 
terion in 381 

Hoffman    Rule    156,  377 

Income  as  a  Determinant 87 

In   Condemnation    128-131 

Industrial     and      Social     De- 
velopments, and 83 

Inheritance   Tax,   and 56 

Irregular       Lots,       How      to 

Value    379,  380 

Loft    Property    70 

Mortgages  and   197 

Neighborhood  Knowledge... 5,   120 

Plottage 131,   381,   382 

Preparation  for   56 

Qualifications   for    . .       82 

Real  Estate  Board  of  Brokers 

and   121 

Records   of    371 

Rents   Not  Always  Criteria . .       5 
Sales  as  Guides. ....  .15,  177,  381 

Standardizing    of    Valuations, 

119-121 

Street  Traffic   and 173,  264 

Suitability  of  Improvement  5, 

65,  75,  117,  214 

Taxes  and    173-177 

Tenement   Property. .  .51,    54, 

92,  118 
Unusual  Features,  Importance 

of    4 

Value   of    Skill   in 56,     82 

Valuing  Property  —  Formula 

for    83,     90 

Appraiser     (See  Appraisals.) 
Architect     (See  Agent,  Broker- 
age, Loft  and  Office  Build- 
ings, Tenements.) 

Armories,    Effects   of 5 

Ashforth,  Albert  B 42-49 


389 


Index 


PAGE 

Assessments     (See  also  Taxes.) 

In  Condemnation  Proceedings  124 
Auction  Sales 

Action  and  Reaction 14 

Auction  Valuations 15 

Bidders,  How  to  Secure 14 

Commissions    386,  387 

Kinds   of    10 

Relieving  Strained  Attention.  14 

Ways  of  Introducing 13 

Auctioneers'    Commissions    ....  386 

Authorization  of  Broker 19 

Automatic  Sprinklers   259 


Brain  Impressions,   Creating...     11 

Broker     (See  also  Brokerage.) 

Commissions  385,  386 

Decisions  Affecting    16-41 

Laws  Affecting   16-41 

Legal  Rights  of 16-41 

Misstatement  of   16-41 

Purchaser  and    38 

Safeguards  for   21 

Written  Authorization    19 

Brokerage  (See  also  Building 
Loans,  Insurance,  Mort- 
gages, Office  Management.) 

Commissions     385,  386 

Commissions,  When  Earned..  16-41 

Compensation    40 

Double  Employment   34 

Dwellings    7 

Legal   Principles  of 16-41 

Methods  of   1-15 

Personality  of   3 

Relationship  with   Customer   16-41 

Titles  and   21 

Written  Authorization   Neces- 
sary in  N.  Y 19 

Bronx,  The 

Compared    with   Brooklyn 352 

Factories,   Effects  of 348 

Limits   for   Sales 352 

Nimphius  Case    353 

Population,   Effect  of 352 

Real   Estate   History 347-354 

Rises  in,   Not  Regular 350 

Values,    Increase   in 349 

Brooklyn   Commissions    388 

Brooklyn      Real      Estate      Ex- 
change Commissions 388 

Buildings  (See  also  Construc- 
tion, Repairs,  etc.) 


PAGE 

Buildings — Continued 

Construction  of   93-111 

Deterioration    of    205 

In  Panics  199 

Loft    63-71 

Office    72-80 

Tenements    92-118 

Building      Loans        (See      also 
Mortgages,  Financing.) 

Associations     218 

Computing  Amount.  ..212,  220-225 

Contract  Building 217 

Cubic   Contents   and 213 

Figuring  Payments   226 

Loan  Associations   218 

New  York  Practice 216 

Operating  on  Small  Capital..   219 

Payments  Under    215 

Percentage    of   Lot 213 

Practice  in  Other  Cities.. 217,  219 

Second  Mortgages    224 

Speculative    Building    217 

Suitability   of    Improvement..   214 
Three  Systems  of  Loans.  .220-225 

Operators'    221 

Owners'    221 

Permanent    225 

Typical     Schedules     of     Pay- 
ments     227,  228,  229 

Burr,  Charles  L 292-312 

Business   Property      (See  Loft, 
Office.) 

Business,    Real   Estate,   How  to 

Start    48 

Buying  Leases   383-384 


Charges,  Carrying  291 

Charter  Provisions   330 

Cleveland  Tax  Plan 179 

Collections     (See  Rents.) 
Commissions 

Appraisals    386 

Auctioneers'    386 

Brokers'    385,  386 

Brooklyn  Auction   Fees 388 

Country    385 

Management    and    Letting    of 

Property     386 

Private  Sales 385,  386 

Renting    385 

Repair    68 

Suburban    385 

When  Payable   16-41 


390 


Index 


PAGE 

Commissions — Continued 

When  Earned   16-41 

Committee  on  Appraisals 121 

Concentration  in  Selling 9 

Condemnation  Proceedings  (See 
also  Appraisals,  Expert  Tes- 
timony,   Water-front    Prop- 
erty.) 
Amendment  to  Constitution..    137 

And   Leases   290 

Appraisals   in    131 

Assessments  for   124 

Delays  in   133-135 

Docks  and  Bridges 125 

Hardship    for   Owner 128 

History  of    122 

In  Other  Countries 141-151 

In  Other  States 137-140 

New  Plan  for 135 

Plottage     131 

Proceedings  for   130,  161 

Property  in  123 

Public   Parks   and 123 

Remainder  of  Plot 132 

Safeguard  for  Owners  in 129 

Sales   as   Criteria 131 

School    Property    125 

Street  Improvements   126 

Title  and  Value  in 128 

Construction  {See  also  Build- 
ing Loans,  Dwellings,  In- 
surance, Loft,  Office,  Mort- 
gages, Repairs,  Water 
Front.) 
Arrangement  of  Rooms..  114, 

115,  116 

Character  of   93 

Cost   of    Ill 

Elevator    and    Dumb    Waiter, 

96,  106 

Equipment    96-110 

Fixtures    96-110 

Foundation   and  Walls 93-95 

Good  vs.  Bad 92-118, 

Height  and  Area 93 

Income    112 

Light  and  Air 113 

Maintenance    112 

Marble  and  Tile  in 95-106 

Painting  and  Plastering. .  .105-107 

Payments    226-229 

Plumbing    102-104 

Quality  of   93-111 

Roof    96-99 


PAGE 

Construction — Continued 

Steam   Fitting    102-104 

Suitaoility  to  Neighborhood..   117 
Tenement  House  Law. ...113, 

313-330 

Trim    98-101 

Contracts 

Between      Broker,      Customer 

and  Purchaser    16-41 

Delivery  of  Deed  and 281 

Description  in   278 

Formal  Contract  Desirable...  277 

How  Avoided    6,  16-41 

Importance  of   276 

In  Options   36 

Liability  Under    283 

Misrepresentation,    Danger   of       6 
Possession  and  Improvement.   283 

Quick  Closing,  Need  for 6 

Surveys  and   282 

Tenement     House     Law     and 

279,  313-330 

Terms  of  Payment  in 280 

Time  as  Essence 282 

vs.  Mere  Receipt 37 

Contract  Building   217 

Corner  Lots,  How  to  Appraise. 
(See  Appraisals  and  Da-vies 
Rule.) 
Corporations 

Advantages  of   270 

Lessons   of   Panic 271 

Real  Estate  vs.   Listed  Stocks  272 

Real   Estate   Shares 274 

Stability  of  Manhattan  Values  273 

Crane,   W.    R 256-261 

Cruikshank,  E.  A 373-376 

Cubic  Contents   Ill,  165,  213 

Curtesy        (See     Estates     from 

Marriage. ) 

Customer       (See     also     Agent, 
Broker,  Purchaser,  Tenant.) 

And  Written  Offer 9 

Classes  of    1-3 

Commissions,  When  Due....  16-41 

Legal   Rights  of 16-41 

Relationship  with  Broker. ..  .16-41 


Damages      (See    also    Condem- 
nation,   Expert    Testimony, 
Repairs.) 
Consequential     158 

Davies,  J.   Clarence 347-354 


391 


Index 


PAGE 

Davies,  William  E 377-384 

Davies    Rule   for   Valuing   Lots 
Corner    Lots,    How    to    Com- 
pute Value  of 378,  380 

Formula    377-378 

Interior   Lots 378-380 

Irregular  Lots    380 

Lots  More  or  Less  Than  25 
ft.  Wide,  How  to  Com- 
pute Value  of 380 

Plottage    381-382 

Tables    for    Lots    of    Varying 

Depths   and   Widths... 3 79-380 

Davis,   G.   Richard 92-118, 

182-192,  212-229 

Day,   Joseph   P 1-15 

Dean,  Philip  S 247-251 

Decision    1-2 

de  Selding,  Joel  S 72-80 

Development        (See     Acreage, 
Brokerage,  Building  Loans, 
Construction,  Investing,  Op- 
erating.) 
Development  of  Acreage     (See 

Acreage.) 
Developments  in  Harlem     (See 

Harlem.) 

Direction  in  Offering  Property    2-3 
Dispossess     (See  Evictions.) 
Divorce  and   Estates     (See  Es- 
tates from  Marriage.) 
Double  Employment  of  Broker    34 
Dower     (See  Estates  from  Mar- 
riage.) 

Dowling,   Robert  E 270-275 

Dwellings 

Deterioration  of   205 

How  to  Sell 7 

Neighborhood  Factors    202 

Style  in   205 


PAGE 

Estates  from  Marriage— Continued 

Barring  Dower    302,  308 

Common  Law  of 292 

Curtesy   296 

Divorce    298 

Dower    300 

Statutory    Changes    in    Corn- 
Common  Law  295 

Evictions    60,  71,289 

Expert  Testimony  (See  also 
Appraisals,  Condemnation 
Proceedings,  Construction, 
Davies  Rule,  Water-front 
Property.) 

Capitalization  of   Rents 164 

Classes   of   Proceedings 158 

Certiorari    158 

Condemnation   158,  161 

Court    158,  163 

Tax    162 

Condemnation  Proceedings  . .  161 

Consequential   Damage 158 

Court   Proceedings    163 

Cubic    Contents    165 

Danger  of  Fixed  Rules 156 

Hoffman    Rule    157 

Interior  Lots    157 

Leaseholds    160 

Preparing  Case  in 153 

Qualifications  for   152 

Ratio  of  Rents 165 

Speculative  Values   and 155 

Suitability   of   Improvement..  164 

Tax  Proceedings   162 

Tenement  House  Law 157 

Value  of  Written  Notes 153 

Water-front  Property 160 

Expropriation  (See  Condemna- 
tion Proceedings.) 


Economic  Factors  of  Value....  238 

Eighty     Per     cent     Insurance 

Clause   255 

Elevators    (See  Tenement,  Loft 
Buildings,  Office  Buildings.) 

Employees 

Loft  Buildings   68 

Office  Building 79 

Status  of    285 

Tenements    61,  285 

Estates  Arising  from  Marriage 
Assignment  of  Dower 303 


Factories,  Effect  on  Value. . . .  348 
(See     also    Industrial    De- 
velopments.) 

Financing  (See  also  Building 
Loans,  Mortgages,  Opera- 
ting, Real  Estate  Corpora- 
tions.) 

Financial   District    264 

Fire  Insurance 

Cost  of   255 

Credit   for   Fire   Appliances..  259 
Eighty  Per  Cent  Clause 255 


392 


Index 


PAGB 

Fire  Insurance— Continued 
Hazardous   Occupants,    Effect 

of   258 

Legal  Points  of 253 

Reducing:  Rate   256-261 

Reductions,  How  to  Secure..   260 

Schedule  Computation    259 

Specific     Rate,     How     Deter- 
mined      256 

Sprinklers    259 

Standard  Policy    252 

Structural    Changes   Affecting  254 
Plats     (See  Tenements.) 
Foreclosure      (See  Mortgages.) 
Foreclosure  Sales,  No  Criterion 

of  Value   381 


PAGE 
Investing     (See  also  Operating.) 

All  Night  Centers 265 

Bronx    374-354 

Changes  in  Twenty-five  Years  262 

Effect  of  Population 262 

Future   Indications    268 

Harlem  Development   266 

Lessons      from      New      York 

Realty   262 

Stability  of  Financial  District  264 
Tenement   Districts,    Fortunes 

in    267 

Transportation,  Effects  of ....  265 
Irregular     Lots,     How    to    Ap- 
praise. (See  also  Appraisals, 
Davies   Rule) 379 


General    Knowledge,    Value   of, 

48,  62,  75 

Gilbert,  Edward  H 81-91 

Guaranteed  Mortgages  184 


Hallock,  John  H 122-151 

Harlem  Developments  266 

Haubold,  R.  O 252-255 

Hawkes,  McDougall   331-346 

Height  and  Area 93 

Help     (See  Employees.) 

Hev,   Edwin  H 63-71 

Hoffman  Rule   157 

Defects  in   377 

How    to    Use 377 

Kurd,  Ceo.  A 193-211 


Improvements  (See  Construc- 
tion, Development  of,  Office 
Buildings,  Acreage,  Loft 
Properties,  Tenement  House 
Law,  Tenements,  Water- 
front Property.) 

Suitability    of    117,  214 

Unsuitable 5,  65,     75 

Industrial     Developments     and 

Values 5,   62,   64,   75, 

120,  238,  348 

Interior  Lots,  Valuing 157 

Insurance  (See  also  Fire,  Title, 
Loft  Buildings.) 

Fire  Record  of  Tenants 66 

Loft  Buildings   69 


Janitor     (See  Employees.) 


Landlord  and  Tenant  (See  also 
Tenant.) 

Assignments    286 

Clauses  in  Leases 289 

Condemnation  and   290 

Eviction    289 

Improvements  by  Tenant....   287 

Repairs  287 

Servants  and  285 

Subleases    286 

Tenant  or  Servant 285 

Tenement  House  Law  Apply- 
ing to   113,  313-330 

Landscaping    356-362 

Law     (See  Real  Estate  Law.) 

Leaseholds 
Value  of 82,  160 

Leases 

Assignment  of 286 

How     to     Compute     Present 

Value    383-384 

Subleases    286 

Tables  of 383-384 

Leasing  (See  also  Loft  Build- 
ings, Office  Buildings  and 
Tenements,  Renting,  Rents, 
Landlord  and  Tenant.) 

Application  Sheet  44 

Commissions  for    385 

Computing  Leases  383-384 

Dangerous  Tenants 45 

Finding  Tenants   .....43,  48,  368 


393 


Index 


PAGE 

'Leasing— Continued 

Listing  Properties   46 

Misrepresentations    43 

Precautions  in   42-46 

References    45 

Renewals 47 

System  in  42 

To  Married  Women 45 

Written  Agreements 46 

Lee,   Ronald  C 363-372 

Loans      (Ste    Building    Loans, 
Mortgages,  Financing.) 

Loft  Property 

Appraising   70,  81-91 

Changed   Conditions   in 63 

Clashing  Tenants 66 

Cleaning  of   65 

Dangerous   Defects    67 

Elevator  Service  in 66 

Evictions    71 

Finding  Tenants 70 

General    Knowledge    Essential  63 

Insurance  in  67 

{See  also  Fire  Insurance.) 

Keeping  Tenants   71 

Modern  Improvements 66 

Mortgaging    70 

Neighborhood  Knowledge    ....  64 

Owner's  Liability   67 

Reducing  Insurance  Rate 69 

Repairs  in   67 

Selling     70 

Special   Requirements  in 66 

Special  Trades  as  Tenants...  64 

Tenant's  Fire  Record 69 

Unsuitable  Improvement   ....  65 


Maintenance  {See  Construc- 
tion, Loft  Buildings,  Office 
Buildings  and  Tenements.) 
Management  (See  also  Tene- 
ments, Loft  Buildings,  Of- 
fice Buildings,  Office  Man- 
agement.) 

As  a  Business 56 

Commissions  for    386 

Definition  of   50 

Management  of  a  Real  Estate 
Office  (See  Office  Manage- 
ment.) 

Manager     (See  Agent.) 
Margins    on    Mortgage    Loans, 

193-211 


PAGE 

Market  Value,  Definition  of 82 

Marriage  and  Real  Estate  (See 
Estates  from  Marriage.) 

Miller,  Henry  F 276-284,  285-291 

Misrepresentation,   Danger  of..       6 

Morgenth.au,  Henry   262-269 

Mortgages      (See   also  Building 
Loans,  Financing.) 

Advantages  of 182-184 

Appraisals  and   197 

Changes  in  Neighborhood....   202 

Common  Form  of 182 

Borrower's  Standpoint   185 

Broker's   Standpoint    186 

Depression  in  Values 201 

Deterioration  of  Buildings...  205 
Forced  Sales,  Dangers  of....  208 
Foreclosure,  Losses  Through.  206 

Foreign  Systems 192,  195 

Guaranteed    184 

In  Options   38 

Keeping  Track  of 367,  369-370 

Lender's  Standpoint   182 

Loft  Property 70 

Margins   on    193-211 

Panics,  Influence  of 199 

Participating    189 

Qualifications  for  Dealing  in.    185 

Rentals  and   198 

Safeguards    209 

Second    224 

Stability  of  in  Panics 231 

Movements  in  the  Bronx     (See 
Bronx,  The.) 

N 

New  York,  Old 373,  375 

New  York  Selling  Commissions, 

385,  388 


Office  Buildings 

Advertising,   Effect  of 74 

Agent  and  Tenants 79 

Agent's  Duty   72 

Buying  up  Leases 77 

Dangerous  Tenants 78 

Elevators  in    79 

Employees  in    79 

Essentials   of  Good 72 

How  to  Keep  Tenants 79 

How  to  Secure  Tenants 77 

Maintenance  of    73 

Neighborhood  and '  75 


394 


Index 


PAGE 

Office  Buildir-gg— Continued 

Ornamentation  and 74 

Owner's  Responsibility   78 

Planning  Offices  in 76 

References  of  Tenants 78 

Suitability  of   75 

Office  Management 

Appraisal  Records 371 

Magnitude  of  Market 363 

Mortgage  Brokerage 369 

Mortgage  Expirations 370 

Mortgages,  Keeping  Track  of  367 
New  York  Systems 367 

Office  Records  (See  also  Rec- 
ords.) 

Owner's  List   365 

Properties,    List  of 366 

Purchasers'  Lists 368 

Records,  Importance  of 363 

Systems  in   363-372 

Tenants'  Lists  368 

Operating  (See  also  Financing, 
Building,  Mortgages,  Build- 
ing Loans.) 

Acreage    244 

Creating  Values 239 

Economic  Factors 238 

Essentials  of  Success 235 

Financing    242 

Industrial  Movements  238 

Precedent,  When  to  Disregard  237 

Realty  History   236 

Small  Capital    219 

Unimproved  Land 241 

Operator's  Loans   221 

Options,  When  Binding 36 

Outlook  in  Real  Estate  Market 

232,  268 

Owner 

And  Broker 16-41 

Commissions  to  Brokers. .  .385-388 

Legal  Points  for 16-41, 

276-284,  285-291 

Liability  of   67,  78 

List  of   365 

Proper  Attitude  of 54 

Safeguards  for 128-129 

Owners'  Loans 221 

Ownership 

Need  for  Verifying 21 


Painting  and  Decorating 
Building.) 


(See 


PAGE 

Panics  and  Real  Estate.... 230, 

234,  271 

Participating  Mortgages   189 

Percentage  of  Lot  (See  Tene- 
ment House  Law,  Building 
Loans,  Building.) 

Permanent  Loans   225 

Personality,   Importance  of....       3 

In  Selling   47 

Pioneer,   Real    Estate 373 

Plottage,   Computing.  .131,   381,  382 
Plumbing     (See  Building.) 

Population,  Effect  of 262,  352 

Private  Houses  (See  Dwellings.) 
Private   Sales,   Commissions  for 

385,  386 
Properties,  List  of     (See  Office 

Management. ) 

Property,  How  to  Appraise  (See 
Appraisals.) 

Protecting  the  Purchaser 9 

Purchaser  (See  also  Customer.) 

How  to  Find 368 

(See  also  Brokerage.) 

Protection  of    9 

Responsibility  of    38 

Purdy,  Lawson   167-181 


Real  Estate  Auctioneers'  Asso- 
ciation of  New  York,  Com- 
missions    386 

Real   Estate   Board  of  Brokers 

121,  385 

Real   Estate  Board  of  Brokers' 

Commissions    386-386 

Real  Estate  Business 

How  to  Start  48 

Real  Estate  Law  (See  Broker- 
age, Condemnation  Cus- 
tomer, Estates  from  Mar- 
riage, Expert  Testimony, 
Landlord  and  Tenant,  Ten- 
ement House  Law.) 

Real  Estate  Office  (See  Office 
Management.) 

Real  Estate  vs.  Bonds 232,  272 

Realty  Corporations  (See  Cor- 
porations.) 

Recording  Tax  Law 

Effects   of    231 

Records     (See  also  Office  Man- 
agement.) 
Standardizing  of    4 


395 


Index 


PAGE 

Reducing  Assessments 176 

References     (See  Tenants.) 

Rental  Value   82 

Renting       (See    Leasing,     Loft 
Property,     Office     Buildings 
Rents  and  Tenements.) 
Rents     (See  also  Leasing,  Evic- 
tions.) 

Capitalizing  of 5,  87,  112,  164 

Collecting   of    60,  71 

Not  Always  Criteria 5,  382 

Ratio  of,  to  Value 165 

Repairs  (See  Construction,  Loft 
Property,  Office  Buildings, 
Tenement  House  Law,  Ten- 
ements.) 

Agents  Commission  for 68 

When  to  Make 68 

Rooms,  Arrangement  of  (See 
Loft  Property,  Office  Build- 
ings, Tenements,  Tenement 
House  Law.) 

Rooms,  Size  of  (See  Loft  Prop- 
erty, Office  Buildings,  Tene- 
ments, Tenement  House 
Law.) 

Ruland,   Irving   119-121 

Rules  for  Valuing  (See  also 
Appraisals,  Condemnation 
Proceedings,  Expert  Testi- 
mony, Hoffman  Rule,  Da- 
vies  Rule,  Lease  Tables, 
Taxes.) 


S 

St  Paul  Tax  Plan 179 

Sales  (See  also  Brokerage,  Auc- 
tioneering.) 
Sales,  Forced 

No  Criteria  of  Value 208 

(See  also  Auctioneering, 
Brokerage,  Davies  Rule, 
Mortgages,  Foreclosure.) 

Schools,   Effects  of   5 

Second  Mortgages   224 

Selling       (See     Brokerage    and 

Auctioneering)     1-15 

Servant     (See  Employers.) 

Showing  Property   7-8 

Shrubs,  Kinds  to  Plant 357 

Simon,   Robert   E 235-246 

Speculative  Building    217 

Sprinklers,  Automatic   259 


PAGB 
Stability    of    Real    Estate.. 230, 

234,  273 

Stabler,    Walter    230-234 

Standardizing  Valuations   119 

Starting  One's  Own  Business..     48 

Stern,  Abraham   16-41 

Stores   79 

(See   also   Bronx,    Leasing, 
Loft,  Office,  Brokerage.) 
Street  Openings     (See  Condem- 
nation Proceedings.) 
Streets,  Suburban,  How  to  Lay 

Out   356 

Subleases    286 

Suburban  Property     (See  Acre- 
age.) 

System,     Advantage     of       (See 
Office  Management.) 


Tables  for  Appraising 377-384 

Tables  of  Leases 383,  384 

Tall       Buildings,       Advertising 

Value   of    79 

Taxes  (See  also  Assessments, 
Expert  Testimony.) 

Block  System   169 

Cleveland   Plan    179 

Corner  Lots  173 

Correcting  Assessments   176 

Factors  of  Value 174 

Field  Work 171 

Floor  Area  as  Factor 175 

Organization  of  Assessing  De- 
partment       167 

St.  Paul  Plan 179 

Sales  as  Guides 177 

Street  Traffic  and 173 

Tenants  (See  also  Dwellings, 
Landlord  and  Tenant,  Loft, 
Office  Building  and  Tene- 
ment.) 

And  Agent 59,  79 

And   Employees    61 

Clashing    66 

Dangerous    45,   69,  78 

Evictions  of    71 

Fire    Record    of 69 

How  to  Find 43-48,  70, 

77,  368 

Keeping   47,  71,  79 

Married  Women  as 45 

Misrepresentations  to    43 

Policy  in  Handling 60 


396 


Index 


Tenants — Continued 

References  of   45,  78 

Requirements  of 65 

Special  Trades   69 

Written  Agreements  with ....     46 

Tenements      (See    also    Apprai- 
sal, Construction,  etc.) 

Agents  of 56 

Construction  of   51 

Earning  Power  of 51 

Employees  in    61 

Fortunes  in 267 

Good  Construction  of 51 

Maintenance  of   54 

Management  of   50-62 

Owners  of 54 

Policy  in  Managing 60 

Repairs  to   57 

Tenants    », 59 

Tenement     House     Law       (See 
also   Condemnation,   Expert 
Testimony,  Tenements.) 
Alterations   Required  for   Ex- 
isting Buildings   320-321 

Construction    of    New    Build- 
ings     321-330 

Charter  Provisions 330 

General  Provisions   313 

How  Enforced   . .  314 

Maintenance   316-319 

New  Buildings  321-330 

Occupancy    316-319 

Owner's  Registry   315 

Penalties 315 

Search     for     Violations,     Im- 
portance  of    313 

Use  of  Tenements 316-319 

Thompson,  John   Means 152-166 

Titles 

Broker  and   21 

Contract   and    

(.See  Contracts,  Broker  and 
Customer,  Estates  from 
Marriage.) 

Title  Insurance 

How  Issued  247 

How  Policies  are  Voided 250 

Nature  of   Policies 248 

What  Policies  Guarantee 248 


PAGE 
Title  Insurance — Continued 

Warranty  and   250 

Transportation,  Effects  of 265 

Trees,  Kinds  to  Plant 356 

Twenty-hour  Centers  265 


Vacant  Land  241 

Valuations     (See  Appraisals.) 
Values  Increase  Irregularly....  350 
Veiller,   Lawrence   313-330 


W 

Ward,  Francis  E iii-v 

Warranty  and  Title  Insurance.  250 
Water-front  Property 

Acquisition     342 

Character  of  332 

Condemnation    342 

Conjunctive  Value    343 

Cost   339 

Expert  Testimony   342 

Extent  of   333 

History  of   334-339 

How  Owned   334-339 

Importance  of    331 

Improvements    339 

Leases  of   342 

Limitation  on  Improvement..  342 

Management   344 

Maps 345 

Municipalization    341 

"New  Plan"   341 

"Old  Plan"    341 

Sales  of   342 

Special  Uses 344 

Taxation    345 

Tidal  Differences   339 

Units  of   Value 343 

Valuing    160 

Wilcox,  Ransom  E 50-62 

Wives  as  Factors  in  Transfers      8 
(See     also     Estates     from 
Marriage.) 

Woodwork     (See  Building.) 
Written  Offers,  Danger  of  Ma- 
king         9 


397 


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